New Payroll Deduction Guide for 2020

Evelyn Jacks

Payroll departments should be aware of a revised payroll deduction guide that was released on November 26, 2019, featuring the specific calculations that will be used in calculating statutory deductions for 2020 pay periods. The highlights are covered in this report and in the updated Advanced Payroll for Small Business course, which will be available to students on January 8, 2020.  

CPP Calculations. The maximum pensionable earnings for 2020 are $58,700 (for insurance companies this number before rounding is $58,712.35). The basic exemption will again remain steady at $3500. The contribution rate for employees is 5.25%. Employees and employers will each contribute an equal amount; that’s $2,898.00 for those who reach the maximum pensionable earnings level. 

QPP Calculations. The contribution rate for 2020 is 5.70% in Quebec; making the maximum employee/employer contribution $3,146.40 each.

EI Calculations. The maximum amount payable is based on the province in which the first $54,200 of insurable earnings is paid. The premiums are calculated as the lesser of $856.36 and insurable earnings x 0.0158. The maximum employer premium is $1,198.90.

In Quebec the formula is the lesser of $650.40 and insurable earnings x 0.0120. The maximum employer premium is $910.56.

Other provincial changes:

B.C.: A new calculation is featured for the provincial tax reduction. The maximum amount available is $476; it is then phased out as net income rises, with no reduction is available if income is over $34,556.

Alberta: The indexation of the Basic Personal Amount has been suspended for 2020 and future years.

Ontario: Two changes in tax calculations here:

  • The provincial tax reduction for 2020 is calculated as follows:
    • $249 for the basic personal amount
    • $460 for each dependent child under 19 (not on TD1 ON, so employees must provide employers with this information in a written or electronic request)
    • $460 for each dependant with a disability – claim on the TD1 ON
  • The provincial surtax is calculated as follows:
  • If basic provincial tax payable (BPIT) is < or equal to $4,830, no surtax is payable
  • If it’s more than $4,830 and < or equal to $6,182, the surtax is 20% of the amount over $4,830.
  • If it’s more than $6,182, the surtax is 20% of BPIT over $4,830 and 36% of the amount above $6,182

NF and Labrador: The Temporary Deficit Reduction Levy has been suspended for 2020 and future years.

PEI:  The provincial basic personal amounts have increased as follows:

  • $10,000 for the basic personal amount;
  • $7,780 for the spouse or common-law partner amount; and
  • $7,780 for the amount for an eligible dependant

Bookkeepers and accountants will also want to be sure that TD1 form for federal/provincial taxes are properly filed by all employees before the start of the year. These forms had not yet been released at the time of writing.

Additional educational resources – become a DFA-Bookkeeping Services Specialist™ , and be sure to check out the soon-to-be-launched with new updates Advanced Payroll for Small Business course.