What are income tax formula?

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Aurn
Member since: Jan 07

Posts: 76
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Post ID: #PID

Posted on: 08-09-07 18:46:53

Hi Guys,

Pay slip showing following figures, could any body let me, what are the formula for calculating these amounts;

Income (for 2 weeks ) : 704
Federal Tax : 43.60
Provincial Tax : 20.22
CPP : 28.18
EI : 12.67

How my employer calculating Federal, Provincial tax, CPP and EI. I am in Ontario and have 26 pay period in a year.

Thanks in Advance

Big Vee
Member since: Jan 05

Posts: 456
Location: Canada-Glorious and Free
Post ID: #PID

Posted on: 09-09-07 16:38:01

Quote:
Originally posted by Aurn

Hi Guys,

Pay slip showing following figures, could any body let me, what are the formula for calculating these amounts;

Income (for 2 weeks ) : 704
Federal Tax : 43.60
Provincial Tax : 20.22
CPP : 28.18
EI : 12.67

How my employer calculating Federal, Provincial tax, CPP and EI. I am in Ontario and have 26 pay period in a year.

Thanks in Advance

The rates vary from province to province. And your employer either uses a software or a service that figures out the formula for them. If you want to double check here is the guide to help you out.

http://www.cra-arc.gc.ca/tax/allrates/menu-e.html

BV

Aurn
Member since: Jan 07

Posts: 76
Location:
Post ID: #PID

Posted on: 10-09-07 13:58:10

I have already visited this link. I used the formulat as mentioned on this site.

tax amount = earnings - (earnings * 15.5%)

But this formula didn't give me same figure as mentioned on pay slip. That's why I asked for the correct formula or the way to calculate taxes on bi-weekly slips.

If anybody knows, please let me know. Only for ON

Thanks

puttoo
Member since: Jan 05

Posts: 1096
Location:
Post ID: #PID

Posted on: 10-09-07 14:27:22

Quote:
Originally posted by Aurn

I have already visited this link. I used the formulat as mentioned on this site.

tax amount = earnings - (earnings * 15.5%)

But this formula didn't give me same figure as mentioned on pay slip. That's why I asked for the correct formula or the way to calculate taxes on bi-weekly slips.

If anybody knows, please let me know. Only for ON

Thanks

Your deductions have been calculated taking your income in a 52 week cycle. i am not sure if they have legally to deduct the taxes for this 52 week cycle even though you have worked for 26 weeks only. I was in the similar situation last year and at the end of year i got a return on the taxes that i had paid additionally.
The EI contribution is to be 1.8% of your pay, which it is and your contribution to CPP ias as per the chart attached, which also seems to be ok
http://www.cra-arc.gc.ca/tax/business/topics/payroll/t4032/jan07/cpp4032_26pp.pdf

The only question is do they "have to"deduct it from your paycheck irrespective of the time you spend on the job.
Hope this helps.

Big Vee
Member since: Jan 05

Posts: 456
Location: Canada-Glorious and Free
Post ID: #PID

Posted on: 10-09-07 17:22:17

You take your gross amount and mulitply by 26 to get your annual gross income. Deduct personal amount of $8,839.

http://www.cra-arc.gc.ca/tax/individuals/topics/income-tax/return/completing/deductions/lines300-350/300-e.html

Then you can deduct $ 2000 for each child under 18.

http://www.cra-arc.gc.ca/tax/business/topics/payroll/howpayrollworks/steps/hiring/td1/menu-e.html

Plus you have to deduct an amount for spouse based on the following formula.

http://www.cra-arc.gc.ca/tax/individuals/topics/income-tax/return/completing/deductions/lines300-350/303/menu-e.html

Finally you multiple the balance with 15.5% and that is your annual federal tax. Divide that amount by 26 to get the amount they should be deducting in your payslip.

GOOD LUCK!

BV

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What are income tax formula?

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