Hi, I have a couple employees who submitted CRA forms T1213 to reduce their source deductions (RRSP/Donations). How to I setup the adjustment in QUickbooks payroll?

[brandt-krause]

The employees specified they have RRSP contributions (outside group plan), donations and other expenses. What type of payroll item is this in QB and what tax tracking numbers do i use?

[LauraAB]

Hi brandt-krause,

Knowing how to configure payroll for these instances is important, as is knowing what accounts and tracking numbers to use. To find out the correct accounts and tracking numbers, I recommend getting in touch with an accountant or the CRA. They'll also be able to let you know if there's any special that needs to be done to calculate this kind of thing in payroll.

Accounting for any additional tax deductions can be done through the employee's profile in the Employee Centre. It's just a few easy steps.

1. Click Employees from the upper toolbar.
2. Choose Employee Centre.
3. Double click the employee name.
4. Choose Payroll Info.
5. Click the Taxes and TD1 button.
6. Change the appropriate fields.
7. Click OK to save to Taxes and TD1 form information.
8. Click OK again to save the employee profile.

To learn more about payroll in QuickBooks Desktop, hit F1 on your keyboard as a shortcut to bring up the QuickBooks Desktop Help screen. On that screen, click the Help tab, then the Search button to activate the search bar. Type in keywords such as "payroll" to bring up related articles.

Stop by again if you need anything else. :)

[Edited]

[brandt-krause]

Thanks Laura - I've set up deductions before and no issues there, but in this case, it's not actually a deduction - it's a reduction in the income on which tax is charged. The T1213 effectively allows the employee to reduce their earnings subject to tax - it's not an actual adjustment to any specific deductions.

Did I miss this in your response somehow?

[LauraAB]

Hello again. My mistake, I misread your question. I've made some edits to my original response which you can take a look at. If you're not seeing it, give the page a refresh. Let me know if you have more questions.

[impossible]

While I am not 100% positive, I believe you would add the NET amount reported on line 14 of the T1213 to the amounts on the TD1 Forms the employees submitted. That woyld increase the Tax Credits and reduce the tax paid. Please check with your own professional accountant.

[Rochelley]

Did these employees give you a Letter of Authority from CRA?  It is not enough that they give you the completed form T1213.  They must send the T1213 to their nearest tax office and wait for CRA's permission to reduce their taxes by way of a Letter of Authority.  It is this letter that you must retain on file.

CRA will provide you a formula for calculating the amount to reduce taxes by on each pay cheque.  Once you know how much the reduction should be, go into your Employee's payroll record-->Payroll Info-->Taxes and TD1-->.  Enter a negative number into the Additional Tax field.  This negative number should be the result of the CRA formula.

For each pay cheque you make after this, the Federal Income Tax will be reduced by this amount.

[MCF1]

This was the most sensible answer, however Quickbooks Online does not allow for negative numbers to be entered into that field.

I'm having the same problem and don't seem to be able to find a good solution.

Any ideas?

[Rochelley]

As the employer you should not even see that form at all.  If your employee brings you a Form T1213, you are not to accept it.  The employee must submit that form to their nearest tax service centre.  The employer must wait for the employee to bring them the Letter of Authority  from CRA.  In this letter will be the formula you are instructed to use to calculate the new federal, provincial or territorial earnings for purposes of determining the statutory tax amount.

If you accept the form T1213 form from the employee and use it to change their tax payable, your company could be liable for any unpaid tax amounts owing.

[RonaDT]

I have this same issue (and, yes, I have the approval from the CRA). QBO won't allow a negative number in the "additional tax amounts" field (and I've had this confirmed on the phone with QB support).  I think the only way to adjust it is via the TD1 amounts.

[Rochelley]

Hi @MCF1 ,

Sorry - the OP was inquiring about Quickbooks Desktop so the answer I gave was pertaining to that.  Since the "F1" formula on the Letter of Authority from CRA is actually a formula to adjust the taxable earnings of the employee for purposes of calculating tax, couldn't you just do the calculation manually and override the amount of tax deducted on each pay cheque? 

[lmdacct2]

Have you ever solved how to handle this in the system or do you just manually calculate?

[Wel2]

Hi Rochelley,

I have same question, and I think I can follow your instructions, as my QB is the desktop version, I can enter the -ve figure, my issue is with the formula itself, it's giving two options, one of them is the manual option, which I believe is what we should do as we are entering a specific amount in QB.  It states divide (for example XXXX) amount by the number of pay periods remaining in the year, and then it says:"Subtract the calculated amount from the gross earnings in each pay period to determine the revised taxable earnings.  Use the revised taxable earning to determine the federal and provincial tax to withhold".  Now I am a little bit confused, if I followed your suggestion, then I am reducing the taxes by this amount and not the gross earnings. I think its not the same thing; I think the figure amount of taxes resulting from deducting the calculated amount from earnings will be different than if I deduct it directly from the taxes itself, or what do you think?  Thank you 

[Jennifer4444]

I personally have never been able to manually override the tax field of a paycheque.  Maybe I'm missing a step.

[Alex M]

Hi there jennifer4444,

It's vital that all your payroll is entered correctly so that your books can be well balanced. QuickBooks Online Payroll is a great tool able to help you calculate payroll for the hours worked. I can point you in the right direction to edit the deductions when running payroll.

In QuickBooks Online, if you'd like to enter custom values for certain deductions and contributions, it would need to be done for each employee individually, and each time running payroll. This can be done when running payroll by going to the Payroll tab, then the Employees section. Select Run Payroll, then click on the Pencil icon beside an employee after entering their hours. You can then go to the Employer contributions and Employee deductions sections, and click in the text boxes to enter custom values for the deductions.

if you have any other questions, feel free to reach out here.

[Jennifer4444]

I was referring to the original post of reducing tax withheld at source.  No one has given a clear answer.  I use QB desktop Premier Contractor.  It is easy to modify Company Summary of deductions.  All fields can be edited.  The Employee Summary all fields EXCEPT federal income tax can be modified.  If you are able to help with that let us know.  The win is desktop allows negative tax in TD1.  Online does not.