Provincial Taxes While at a Det

[RubberTree]

Good evening...
Question: If a member is posted to a Det in one province with their HQ in another, what provincial tax rates should they be paying?

I believe it should be the province in which they are showing up for work (the Det location)however that doesn't seem to be the case in this situation which is making for some surprising and unwelcome tax time surprises for some members.

Any thoughts on the matter would be appreciated.

Thanks, RT

 

[brihard]

Province of actual residence. Your military posting doesn’t matter. It’s where you ordinarily reside.

https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/personal-address-information/your-province-territory-residence.html

 

[RubberTree]

Thank you. That makes sense. Now to try and get the info changed at the OR so the proper taxes will be taken off from this point forward.

 

[brihard]

Thank you. That makes sense. Now to try and get the info changed at the OR so the proper taxes will be taken off from this point forward.

You need to submit a TD1 form for your province of residence.

 

[dapaterson]

As I understand it, you're taxed at source where you work, and pay at year end on where you live.  A less than optimal system.

 

[RubberTree]

I believe that is what is happening here with the "at source where you work" determined to be one province and the "where you live" another. I'll suggest the members submit a TD1 to the OR and see what happens. I feel the problem should not have happened in the first place however and I expect some members will owe thousands in taxes this year.

Thank you both, I appreciate the advice.

 

[ballz]

There's absolutely no reason the OR couldn't and shouldn't have calculated the proper source deductions for the members. Payroll is supposed to be their expertise, not the 18 year old private... most people don't even know you can fill out a TD1 to change source deductions. While it's a situation a bit unique to the military, it's the employer's job to ensure deductions at source are correct and there are hefty penalties and interest for those who don't, not to mention if it's uncollectable it becomes the employer's debt to CRA. Double standards as usual for the Federal government.

And yes, the taxes payable are based on where you lived on 31 Dec.

 

[RubberTree]

There's absolutely no reason the OR couldn't and shouldn't have calculated the proper source deductions for the members. Payroll is supposed to be their expertise, not the 18 year old private... most people don't even know you can fill out a TD1 to change source deductions.

Agreed 100%. It's frustrating to even hear about it happening.

 

[Blackadder1916]

This is what CRA says on the matter.

https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/payroll/payroll-deductions-contributions/income-tax/reducing-remuneration-subject-income-tax/letter-authority.html

Which provincial or territorial tax tables should you use?

Employment income
When you pay employment income such as salaries, wages, or commissions, you have to determine your employee’s province or territory of employment so you can withhold the proper deductions. This depends on whether your employee physically reports for work at your establishment or "place of business".

For income tax, CPP and EI withholding purposes, an "establishment of the employer" is any place or premises in Canada that is owned, leased or rented by you and where one or more employees report to work or from which one or more employees are paid.

This does not have to be a permanent physical location. For example, the place of business for a construction company can be one or more construction sites or the place of business for a carnival can include a shopping mall parking lot. In these examples, the employee’s province or territory of employment would be the one in which the field office or shopping mall is located.

Employee reports to your establishment
If your employee reports to your establishment in person, the employee’s province or territory of employment is the one in which it is located. There is no minimum amount of time the employee has to report to that place.

Example 2
Your employee lives in Quebec, but you require your employee to report to your place of business in New Brunswick. In this case, use the New Brunswick Payroll deductions Tables.

You can request to have a different amount deducted at source but the province that is supposed to be used for the standard formula is the province of employment.  If a different amount is requested there are rules that have to be followed and will usually not permit source deductions that will be less than what the standard formula says.  However, special situations are considered.

Special situations
a) If an employee reports to your place of business for part of a pay period in one province or territory and part in another, use the tables for where the employee spent the most time.

b) An employee who lives in one province or territory but reports to your place of business in another might have too much tax deducted. If so, he or she can ask you to reduce tax deductions by getting a letter of authority from any tax services office. For more information, go to Letter of authority.

The opposite could also occur: an employee may not have enough tax deducted. In these situations, the employee should request additional tax deductions at source. Go to Increasing income tax deductions.

 

[ballz]

This is what CRA says on the matter.

The establishment that the employee reports to is the Detachment, not the location of the HQ it's detached from. Otherwise, we'd have a real impressive cr*pshow.... with people on any given Base literally being based off 5 or 6 different provinces, and every Div Comd having their source deductions calculated off of Ontario, etc.

an "establishment of the employer" is any place or premises in Canada that is owned, leased or rented by you and where one or more employees report to work or from which one or more employees are paid."

The Det is owned or leased by the CAF and it's where the member reports for work. If you were to go with the latter option (from which one or more employees are paid), we'd all have our source deductions done based on the Ontario tables. And you wouldn't be able to go with the latter option because:

If your employee reports to your establishment in person, the employee’s province or territory of employment is the one in which it is located.

Example 1 is the relevant one here, it's exactly what's happening.....
"Your head office is in Ontario, but you require your employee to report to your place of business in Manitoba. In this case use the Manitoba Payroll deductions Tables."

Example 2, which you have cited, is talking about living in Quebec and physically reporting in NB. That's why it's preceded by "If your employee reports to your establishment in person"

The source deductions are supposed to be based on the location of the Det.

 

[Navy_Pete]

Yes, the source deductions are based on the physical location of the det, but the actual taxes you pay are based on where you reside at the end of Dec in that year, so it's pretty straightforward to set it up so your tax deductions are based on your province of residence (if you don't happen to live in the same province).  Most ORs do this automatically, but if not pretty easy to change.

Other common situations where this comes up is IR, short postings with no cost moves (ie career courses), deployments, etc.  This is also super common in the NCR, where people regularly work in QC but live in ON; you get T4/R1 for QC at the end of the year, but the deductions are based on your residence.  More critical if you work in ON but live in QC, as you would owe thousands at the end of the year if they only deducted ON taxes.

 

[CountDC]

to add fun - OR's don't in general calculate taxes anymore, the system (currently CCPS) does it based on the information that is in there.  This is where a proper in clearance comes in. You should review your pay information as part of your in routine including the location of employment it shows.  That is your chance to point out if there is an error and have it corrected.  Also the time to ask all the questions.  If this was done there would be no surprises come tax time - you would already know what rate is deducted and what rate you will be calculated under when you file.  If the rate deducted is too low complete the TD1 for more to be deducted.  If too much go to CRA to obtain the authority to reduce source deduction or wait for the refund when you file.  This should be part of your ARV/PRV or what ever name they use in your local also.

Unfortunately somewhere along the line it was decided members ability to verify pay records was not important and dropped in many places.  When was the last time you were shown your notes screen?  Might want to have a look as sometimes very old notes stay there for a long time. Ever have an acquisition card?  How about a small deduction that was supposed to stop - are you sure it was?