The technical side of payroll, if done incorrectly, can cost the employer or the employee money. It is important to make sure payroll is more than simply accurate.
As an individual employer, you may have specific documentation new employees are required to complete. In addition to these, there is also specific documentation required from new employees for CRA purposes.
The information CRA requires and why it is helpful to have are showcased below.
SOCIAL INSURANCE NUMBER (SIN)
The Social Insurance Number is required for employment in Canada. The SIN must be requested from a new employee within 3 days from the date of commencement of employment.
Having a valid SIN ensures all payroll information being sent to CRA and HRSDC is being sent for the right employee.
The new employee must complete form TD1 ñ Personal Tax Credits Return, and the employer must keep this form on file. Note, there are a variety of different TD1 forms available for different situations and, over and above the federal TD1 form; there is an additional, separate form for each province or territory.
2008 Federal and Provincial TD1 Forms can be found here by clicking here.
It is very important every employee fills out this form each year. This ensures all information in the employee's file is current. If a person stops going to school or has a change to their dependants, it is necessary for them to fill out a new TD1 form.
Other information completed by the employee should be retained and put in the employee's personal file.
A TD1 form helps the employer and employee determine the proper amount of tax to be deducted from the pay. An employee may have deductions and/or credits available that are not on the TD1 to help reduce the amount of tax to be deducted.
After an employer hires an employee it is important to find out the birth date of the employee. Employees who are under the age of 18 or over the age of 70 should have CPP deductions taken unless the employee is receiving benefits under the Canada Pension Plan while continuing to work. In the year an employee reaches the age of 18, CPP will commence being deducted on the first pay of the month following the month in which they reach 18 years of age.
Excerpted from Advanced Payroll for Professionals, one of the courses that is part of the DFA, Certified Bookkeeping Specialist program. Learn how to handle this and many more payroll issues with ease - Register before June 15 and save.
This course also provides the opportunity to gain insight into: completion of a full payroll cycle, TD1/T1213 form completing, accounting for statutory and non-statutory deductions, taxable and non-taxable perks and benefits and T-slip preparation for any business using Simply Accounting as the framework.