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Level 2

canada income tax deduction for students

I have a summer student who checked the "total income less than total claim amount" bo x on his TD1.  How do I set him up so that he has no income tax deducted from his pay?

6 Comments
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QuickBooks Team

canada income tax deduction for students

Hi BradleyB,

 

It's awesome to hear that you've got a summer student working with you. I hope they turn out to be a great asset for your business!

 

Changing the TD1 information in QuickBooks Desktop is an easy process. Just follow these steps.

  1. Click Employees in the top menu and choose Employee Centre.
  2. Click New Employee to begin setting the student up or double click their name in your employee list if you've already started.
  3. Go to the Payroll Info tab.
  4. Click the Taxes and TD1 button at the top right of the New/Edit Employee window.
  5. Ensure you have the correct province selected and change the information accordingly.
  6. Hit OK to save the TD1 information.
  7. Click OK to save the employee profile.

You should be good to go. If you're not certain which boxes on the TD1 window you need to change, check in with the CRA or an accountant. We can even help you find an accountant familiar with QuickBooks Desktop. Use your postal code in the Find a ProAdvisor page to find QuickBooks-savvy accountants in your area. Check out the Contact information page on the CRA to learn how to get in touch with them.

 

I'm here if you have further questions. :)

Highlighted
Level 2

canada income tax deduction for students

Thanks Laura,

I am sorry to say that your answer did not help.

To clarify my question, it is as follows: Is there a way to set up an employee so that there is no income tax deducted from his pay?  If so, how do I do it?

Brad

 

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QuickBooks Team

canada income tax deduction for students

I see what you're saying. I recommend confirming the following details with an accountant to make sure this is correct and what you need to do, but it is possible to zero out the numbers on the TD1 and also on the pay cheque itself for the Federal calculation. When you run payroll, it's possible to manipulate the numbers in the Employee Summary section if necessary, which is where you can change the Federal Income Tax calculation if necessary.

 

If that's still not quite what you need, consulting an accountant familiar with the program is ideal as they'll have an idea of how it can be manipulated to meet your needs.

 

[Edited]

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QuickBooks Team

canada income tax deduction for students

Hello again, Bradley. I've made some edits to my last response to incorporate something I had originally overlooked. Take a look at my edited response to see what I've said and let me know if you have questions about it.

Highlighted
Level 2

canada income tax deduction for students

Thanks Laura,

I have concluded from your response and my own review of the program that there is no way to set up an employee so that there is automatically no income tax deducted.  I will pass on contacting a ProAdvisor but will watch this forum to see if anyone in the community is able to suggest a solution. 

In the meantime, we will manually zero out the income tax when the pay is being prepared. That accomplishes the end result that is needed but it would be preferable if it could be set up to occur automatically.

 

  

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Level 7

canada income tax deduction for students

@LauraAB  is absolutely correct.  Since the lowest basic personal exemption allowed is defaulted on the TD1 for the employee, tax will always be calculated based on the wage amount in a particular pay period .  The only way tax will automatically not calculate on the employee's cheque, is if each pay period, the amount paid is equivalent or lower than the basic personal exemption.

 

For example, in 2019 the basic personal exemption is $12,069.  If your employee is paid:

 

Weekly and earns =< $232.10/cheque, QB will not calculate tax

Bi-Weekly and earns =< $464.20/cheque, QB will not calculate tax

Semi-Monthly and earns =< $502.88/cheque, QB will not calculate tax

Monthly and earns =< $1005.75/cheque, QB will not calculate tax

 

Unfortunately, because your employee is a summer student, although they will make less than $12,069 all year, they are most likely to be earning higher amounts in a short period of time.  Because their wages are likely to be more than what you see above for those pay periods, QB will automatically calculate tax as though they are making the same amount of money for all pay periods in the year.  Therefore your only option is to manually adjust tax in the Employee Summary on each pay cheque.