A TD1 is simply a form used to calculate how much tax should be withheld from your income.
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 it along to the Canada Revenue Agency (CRA).
If you’ve had any sort of legal employment — at a cafe, a clothing store, or at a 9-to-5 office job, then you’ve likely already filled out a few of these upon getting the job.
The purpose of Form TD1
The government created the TD1 form so it is able to collect the appropriate amount of tax from you on a regular basis.
It’s easier for the CRA 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 average tax rate of your salary and your basic personal amount. If it turns out that it collected too much tax, then the CRA will refund any excess. If it collected too little tax, then you will owe something in April. 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
Have an income situation that has drastically changed and they need to change amounts on the form
Want to claim the Northern residents deduction
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 prepay the CRA.
On the flip side, if you’d rather decrease the amount of tax deducted at the 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 Registered Retirement Savings Plan 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 Form TD1
Misconception #1: You send the TD1 form 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 to the government.
This is wrong. The amount of tax you owe is calculated when you fill out your tax return, and is determined by your total income, minus your deductions, multiplied by your average tax rate, minus your tax credits at the tax credit rate. If the CRA deducted too much at the source, you’ll get a refund; if they 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.
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 (as of 2024):
Basic personal amount, up to $15,705
Caregiver for infirm children, up to $2,616 for each child
Caregiver for infirm spouse or common-law partner, up to $8,375
Caregiver for infirm dependents over 18 years old, up to $8,375
Age amount, if over 65, up to $8,790
Pension amount, up to $2,000
Any amount of tuition fees paid over $100
Disability Tax Credit, up to $9,872
Note: If you have multiple employers, then you can only claim personal tax credit amounts on one TD1. That means on your second and third TD1 form, you must check the "More than one employer or payer at the same time” box, 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 CRA forms exist for:
TD3F for fishers
TD1X for Canadians who get paid by commission
TD1-IN for Status Indians who want to determine if their income is exempt
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