How to Fill Out a TD1 Form Canada and When

How to Fill Out a TD1 Form Canada and When

One often overlooked aspect of setting up payroll in Canada is basic onboarding paperwork that ensures employers process payroll accurately and compliantly. Every employee onboarding package should gather personal and banking information and include a set of TD1 tax forms. Failure to complete TD1 forms can result in fines for employees, and problems for employers.   

For international employers, understanding foreign tax obligations is one of the hardest parts of hiring remote Canadian workers. But don’t worry, we’re here to help. In this blog we go over the purpose of TD1 forms, when they should be filled out, and how working with a PEO makes onboarding easy!  

What Is a TD1 Form?  

The TD1 form, or TD1 Personal Tax Credits Return, is a set of federal and provincial/territorial documents that helps employers calculate how much income tax they should deduct from employee paycheques. The federal TD1 form pertains to federal income tax and credits and the provincial/territorial form pertains to the employee’s province of work. Employees can claim the basic personal amount on each, as well as a variety of other tax credits.  

When filling out TD1 forms, employees declare their estimated income for the coming year, any dependents they have, and any special tax credits they are eligible for including the Disability Tax Credit, Northern Residents Tax Credit, and deduction for living in a prescribed zone.   

TD1 Form and Source Deductions

Employers use TD1 forms to set up source deductions in their payroll system and don’t change the amount of income tax deducted unless the employee changes jobs, moves, or becomes eligible for new personal tax credits. 

When filling out the TD1, employees can choose to claim the basic personal amount of tax credits or opt to have more tax deducted at source from their pay. The basic personal amount in 2024 is $15,705. To reduce source deductions employees must submit a formal request by filling out the Canada Revenue Agency’s Form T1213. Employees must indicate what credits they have failed to take advantage of in the past and should be applied to their source deductions going forward.   

Form T1213 is then submitted to the CRA for approval. Only after an employer has received a CRA letter of authorization can they reduce source deductions.  

You can find Form T1213 here.  

When Should I Fill it Out?  

When you start a new job or move from one province to another, you will be provided with new TD1 forms. These forms should be completed within seven days and returned to your employer for safekeeping. Failure to complete your forms can result in penalties, including a late fee of $25 per day up to a maximum of $2500.  

There are a few other circumstances in which you should complete a TD1, including:  

  • When they retire and begin to collect an employer pension.   
  • When they have new dependents such as a spouse or child.   
  • If they have become eligible for the Disability Tax Credit.   
  • If they have become eligible for the Northern Residents Tax Credit.   

You can find the 2024 TD1 form here.  

How Working with a PEO Can Help  

PEO’s that deliver employer of record solutions hire your international workers and then lease them back to you to direct. In doing this, they take on local compliance and payroll so that you don’t have to.  

Canadian Payroll Services ensures that your team receives a great onboarding experience and is set up the right way from the start. Our experienced HR Account Managers and certified Payroll Practitioners keep on top of changes in employment law and tax rates so that your employees will always be payrolled accurately, on time and in full compliance with Canadian law.  

Want to learn more about how Canadian Payroll Services can help simplify my international hiring and payroll? Contact us today!  

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