"Total Income Less Than Total Claim Amount" box on the Form TD1 — How to handle this in QBO Payroll?

Jemhadar · ‎August 03, 2020

When an employee checks the box for "Total income less than total claim amount" on the Form TD1, stating that his total income for the year from all employers will be less than his total claim amount on Line 13, you are not supposed to deduct any income tax from his earnings.
How do I handle this in QBO? There is no checkbox to not deduct income tax. I hope the suggestion isn't to manually override income tax amount to NIL on every single paycheque he ever receives, as this not a very good solution, in my opinion. There should be a way to automate it like with not deducting CPP or EI.

Thanks in advance for the help and suggestions.

Jem

LauraAB · ‎August 04, 2020

Hello Jem,

I want to make sure you have the information you need to set up your payroll to reflect the "Total income less than total claim amount" on a printed TD1 form. Accuracy is key in these situations to prevent needing to make corrections down the line.

How you'll go about this depends on which Payroll module you're using. It sounds like you may be using Standard Payroll since you've seen where to choose the exemption for CPP and EI and are searching for the income tax exemption. At this time, there isn't a toggle for exempting income tax in this module and manually zeroing out the income tax field in the pay run is how you can accomplish this.

In case you're not sure where to find this, this is how you can do that. When running Payroll, click the pencil icon in the Net Pay column on either the Run Payroll or Review and Submit page. Select Employee taxes, then change the amount in the Income Tax's Current column.

I know this creates a few extra steps, so I encourage you to share your feedback about this using the steps in this article: How do I submit feedback? Your voice matters when it comes to the features in QuickBooks Online and its add-ons like Payroll, and feedback helps us grow the program as we learn that tools users would like to have when managing their books.

If you happen to be using Advanced Payroll, there's a simple toggle you can use to turn off income tax deductions. Here's how you find it.

Click Payroll from the left menu.
Select the Employees menu.
Click Edit beside the employee name.
Choose the Taxes tab.
Click the toggle Withhold income tax in the Tax Settings section.
Click Save.

Do this on each employee profile as needed and you'll be set to run payroll.

I hope that brings clarity to the situation. I'll be around if you have further questions.

View solution in original post

AddieC · ‎August 03, 2020

Hi Jem,

It's so awesome that you've decided to use QuickBooks Online in combination with one of our payroll products! Whether you're using Standard or Advanced Payroll, you'll love how much time you save and how simple it is to streamline your bookkeeping. If you're trying to set your employee up to be exempt from CPP or EI, you'll be able to do this in just a few clicks. I'll explain how to do that based on which version of payroll you have.

If you're using Standard Payroll, follow these steps to exemplify your employee from EI and CPP deductions:

1. Click the Payroll tab on the left navigation menu.

2. Select Employees.

3. Click to select the employee you need to edit.

4. Select the pencil icon next to Pay.

5. Click the pencil icon next to the Tax Withholdings question.

6. Scroll down until you see tax exemptions.

7. Check the box next to CPP and EI to exclude from these tax withholdings.

8. Click Done.

If you're using Advanced Payroll, follow the steps in this article to set up the tax settings for your employee: QuickBooks Online Advanced Payroll - Pay & tax settings.

If you have any other questions, please don't hesitate to reach out to our tech support team.

Take care.

Jemhadar · ‎August 03, 2020

Hi,

I am not looking to exempt this employee from CPP or EI.

He needs to be exempted from having income tax deducted — as per his completed Form TD1.

LauraAB · ‎August 04, 2020

Hello Jem,

I want to make sure you have the information you need to set up your payroll to reflect the "Total income less than total claim amount" on a printed TD1 form. Accuracy is key in these situations to prevent needing to make corrections down the line.

How you'll go about this depends on which Payroll module you're using. It sounds like you may be using Standard Payroll since you've seen where to choose the exemption for CPP and EI and are searching for the income tax exemption. At this time, there isn't a toggle for exempting income tax in this module and manually zeroing out the income tax field in the pay run is how you can accomplish this.

In case you're not sure where to find this, this is how you can do that. When running Payroll, click the pencil icon in the Net Pay column on either the Run Payroll or Review and Submit page. Select Employee taxes, then change the amount in the Income Tax's Current column.

I know this creates a few extra steps, so I encourage you to share your feedback about this using the steps in this article: How do I submit feedback? Your voice matters when it comes to the features in QuickBooks Online and its add-ons like Payroll, and feedback helps us grow the program as we learn that tools users would like to have when managing their books.

If you happen to be using Advanced Payroll, there's a simple toggle you can use to turn off income tax deductions. Here's how you find it.

Click Payroll from the left menu.
Select the Employees menu.
Click Edit beside the employee name.
Choose the Taxes tab.
Click the toggle Withhold income tax in the Tax Settings section.
Click Save.

Do this on each employee profile as needed and you'll be set to run payroll.

I hope that brings clarity to the situation. I'll be around if you have further questions.

Jemhadar · ‎August 04, 2020

Ok, I was _really_ afraid that's what I was going to be told... This is so, so frustrating. :-/

As a work around for this (annoying) deficiency, I had even tried setting the federal and provincial TD1 total claim amounts to $999,999 (the maximum allowed to be entered in the system), in the hopes that something so ridiculously high might cause the income tax deducted to go to NIL; however, that didn't work either. On an average pay, the QBO payroll system was still calculating a small amount of income tax to deduct (~ $20).

So frustrating that in the standard payroll module you can't simply toggle this on and off...!

I will share my feedback about this matter with QBO as you suggest.

Thanks anyways,

Jem

LauraAB · ‎August 04, 2020

That was a great troubleshooting step to take in regards to setting the total claim amounts high on the TD1 setup. I hear what you're saying about how this would be much easier with a toggle and am glad to hear you'll be submitting feedback. Please don't hesitate to stop by again should you need anything else.

I hope you enjoy your day.

PhoenixTees · ‎August 11, 2020

Hi all...

Just came across this last night. The work-around of setting the claim amount high to prevent taxes being deducted does work. The deductions you see are for CPP and EI. The TD1 claim status of tax exempt does not exempt an individual from CPP and EI; these are separate exemptions not linked to the TD1. CPP exemption is usually age driven (under 18 or over 65) and the only time I am aware of for EI exemption is if the employee is also an owner of the business.

C. McGuirk

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"Total Income Less Than Total Claim Amount" box on the Form TD1 — How to handle this in QBO Payroll?