What is TD1 form

TD1 FORM

• TD1 is simply a form used to calculate how much tax should be withheld from your payments.
• It’s a self-reporting form that allows employees to list out all credits they qualify for to help determine how much tax will be withheld from their check.
• It’s one of the most important employee tax forms, so take it seriously when filling it out.
• Employers and pension payers are most likely to request you fill out this form so they can figure out how much tax to retain from their payouts and send it along to the CRA. * The purpose of Form TD1 -
• The governments created the TD1 form so it would be able to collect the appropriate amount of tax from you on a regular basis.
• It’s easier for the government to estimate the amount of tax you will owe at the end of the year and take it incrementally from each paycheck, instead of trusting you to set aside the correct amount of money and hand it over.
• The goal is to gather enough information about your salary, along with the tax credits you will be using so that it can roughly calculate the percentage of your income that you will owe in tax at the end of the year.
• Obviously, the more applicable tax credits, the less tax will be taken from your pay check and the more money you’ll have to live on. If you have no applicable tax credits, and many don’t, then the amount of tax taken will be based on the marginal tax rate of your salary.
• If it turns out that it collected too much tax, then it will refund any excess. If it collected too little tax, then you will owe some. The exact amount is calculated when you do your tax return. * Who should fill out a TD1?
• Individuals should fill out the form if they: ? Start a new job. ? Start getting payouts from a new pension.? Have an income situation that has drastically changed, and they need to change amounts on the form.? Want to claim the deduction for living in a prescribed zone (like Nunavut) ? Want to increase the amount of tax deducted at the source. * Misconceptions about Form TD1
• Misconception #1: You send the TD1 form to the government yourself. This is wrong. You give it to your employer.
• Misconception #2: The information you enter on the form changes how much tax you end up owing the government. This is wrong. The amount of tax you owe is detailed when you fill out your tax return, and is determined by your total income, minus your credits and deductions, multiplied by your average tax rate. If the CRA deducted too much at the source, you’ll get a refund; if it deducted too little, you’ll have to pay the difference.