What is Form TD1?

Danielle Kubes is a trained journalist and investor who has written about personal finance for the past six years. Her writing has been published in The Globe and Mail, National Post, MoneySense, Vice and RateHub.ca. Danielle writes about investing and personal finance for Wealthsimple. She has a Bachelor of Humanities from Carleton University and a Master of Journalism from Ryerson University.

A TD1 is simply a form used to calculate how much tax should be withheld from your payments.

Employers and pension payers are most likely to request you fill out this form so they can figure out how much tax to retain from their payouts and send along to the CRA.

If you’ve had any sort of legal employment—at a cafe, a clothing store, or at a 9-5 office job, then you’ve likely already filled out a few of these upon getting the job.

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What is Form TD1?

The governments created the TD1 form so it would be able to collect the appropriate amount of tax from you on a regular basis.

It’s easier for the government to estimate the amount of tax you will owe at the end of the year and take it incrementally from each paycheque, instead of trusting you to set aside the correct amount of money and hand it over.

The goal is to gather enough information about your salary, along with the tax credits you will be using so that it can roughly calculate the percentage of your income that you will owe in tax at the end of the year. Obviously, the more applicable tax credits, the less tax will be taken from your paycheque and the more money you’ll have to live on. If you have no applicable tax credits, and many don’t, then the amount of tax taken will be based on the marginal tax rate of your salary. If it turns out that it collected too much tax then it will refund any excess. If it collected too little tax then you will owe some. The exact amount is calculated when you do your tax return.

Who should fill out a TD1

Individuals should fill out the form if they:

  • Start a new job

  • Start getting payouts from a new pension

  • Their income situation has drastically changed and they need to change amounts on the form

  • Want to claim the deduction for living in a prescribed zone (like Nunavut)

  • Want to increase the amount of tax deducted at the source

There are many reasons why you would want to increase the amount of tax deducted at the source.

One reason could be because you love getting a big lump-sum tax refund. Or maybe you have other sources of income and find that you’re owing too much at tax time and would rather pre-pay the CRA.

On the flip side, if you’d rather decrease the amount of tax deducted at source, fill out Form T1213. After filling out this form the CRA will send you a certified letter that you can then give to your employer or payer.

Most likely you’ll want to do this if you claim big deductions on your tax return and are significantly overpaying throughout the year. Instead of getting a lump sum in a refund, you may prefer to have the money to live on throughout the year. If you deduct items like RRSP contributions, spousal support payments, interest expenses on investment loans or big donations, then you’ll likely want to request a reduction. You will have to fill out this form every year or two.

Misconceptions about TD1

Misconception #1: The TD1 form is that you send it to the government yourself.

This is wrong. You give it to your employer. Misconception #2: The information you enter on the form changes how much tax you end up owing the government.

This is wrong. The amount of tax you owe is detailed when you fill out your tax return, and is determined by your total income, minus your credits and deductions, multiplied by your average tax rate. If the CRA deducted too much at the source, you’ll get a refund; if it deducted too little, you’ll have to pay the difference.

How to fill out form TD1

You must fill out two TD1 forms when you start a new job: one for the federal government and one for the provincial government. Once you complete the form you should give it to your employer or payer.

Starting January 20, 2020 employers no longer give a paper TD1 form to their employees. Instead they are supposed to give a link to this webpage where employees can print it and hand it in, or print it, then scan it and email it.

Employees can also have the option of making their own “electronic” TD1 form as long as it mirrors the government’s TD1 form. Why this is beneficial to anyone is unclear.

Besides that, filling out the TD1 is straightforward. You simply estimate the credits you will be claiming for the year.

Here are some examples of credits you can claim:

  • Basic personal exemption, up to $13,229

  • Caregiver for infirm children up to $2,273 each child

  • Caregiver for infirm spouse or common-law partner, up to $12,298.00

  • Caregiver for infirm dependents over 18 years old, up to $7,276

  • Age amount, if over 65, up to $7,276.00

  • Pension amount, up to $2,000

  • Tuition fees

  • Disability tax credit, up to $8,576

Note: If you do have multiple employers (this rules out most gig workers who are independent contractors, not employees) then you can only claim personal tax credit amounts on one TD1 . That means on your second and third TD1 form you must check "More than one employer or payer at the same time,"l box and leave the credit amount lines blank (lines 2 through 12) and enter “0” for your Total Claim amount on line 13. This is because you’ve already claimed your credits and there’s no point in doing it twice.

Special TD1 forms

Special T1 forms exist for:

  • TD3X for fishers

  • TD1X for Canadians who get paid by commission

  • TD1-IN for Status Indians who want to determine if their income is exempt

Last Updated May 14, 2020

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