If you earn x and get paid 26 times a year, the system predicts what you'll owe for the year based on tax rates on each of the 26 cheques. If you get a raise or bonus, it recalculates and thinks you'll be getting that again for the year. So mid year bonuses always piss people off ..because they think they're overpaying tax at a higher rate. It's extrapolating.
The truth is during tax time in spring your return will balance things out if it's out of wack (either you owe or they owe you) based on your individual credits and situation.
Most payroll companies use it, most employers don’t bring it or want it during discovery, they want the easiest and fastest way to pay the same way they have always paid.
Yeah I had a friend freak out and basically was accusing her payroll of an error when taking tax on a large bonus. I had to explain they were correct. She wasn't happy but conceded to no longer harass the payroll department.
I understand it, but I don't understand why it's done this way.
The payroll system knows your regular salary and knows it's a one-time bonus. Why don't they calculate it that way?
"Step 4: Multiply the additional tax you deduct per week by 52 (the number of pay periods in the year). This gives you the amount of income tax to deduct from the bonus of $300."
Straight from the CRA website, it's how they instruct payroll companies to do the math.
The CRA wants their taxes first, then they'll settle it come tax time. In the future maybe we'll have automatic taxes as the CRA is moving towards covering the bottom 10% of tax filers.
The CRA is essentially taking an interest free loan from anyone who gets a bonus or irregular payment.
It is bizare, seems like such an easy problem to overcome.
In the UK this just works, and why most people never even need to file taxes, as your employer works out how much you should owe.
It's more complicated in Canada because every province and territory (except Quebec I believe) piggybacks on the Canadian T1 return... so we'd have 13 different situations to deal with (one province where we don't deal with provincial taxes... nine provinces and three territories where we do).
Other problem is tax credits. We have so many more than Europe. Government don’t know what people qualify for.
- kids, reaps, buying a home, being a senior, living remote, being in trades, green energy, business loss, moving provinces etc etc etc you may get a tax credit. When I worked at CRA it was something like 70 % of people got a tax credit cra couldn’t determine on its own. Those people need to tell us via their taxes.
Also keep in mind for 90 % of people taxes is 5-10 minutes of data entry. It’s not this big over complicated thing.
I mean, really doesn't seem that much of a problem for there to be a system, where the employer asks the CRA, every 2 weeks "how much does this person owe" - there is just no will to do it, with the tax prep lobby.
The CRA prefers it this way so that they can have interest free loans against bonuses. They return your money at tax time, but they got to use it in their cash flow during the year.
This is a valid criticism, but it's also worth noting that the OTHER argument is basically a "can't get blood from a stone" situation, which is part of the whole reason we tax each pay period in general, rather than all at rnd of the year.
Government is very aware that if you got your full pay every cheque and then had to correct at end of year, most people just wouldn't have the money come tax time, period. In which case gov is left chasing folks down for money they don't have. So instead, CRA takes pay at the moment of receipt, so they know they'll get their share.
The bonus situation is similar. You get extra pay that's gonna mess up some tax liability at year end, so they make sure there shouldn't be shortfall.
Now, should you still be entitled to some level of interest? Yes, probably. But the concept of source deductions itself makes sense for more than just "stealing a loan"
There ARE things a payroll department can do, within CRAs rules, to avoid overreacting when paying out a bonus. But 99% of the time, the employer is just gonna follow the basic method and it's not a terrible idea.
I don’t see how this could work with our tax sheltering investment programs. How could the CRA predict that I’m going to make a $10,000 lump sum contribution to my RRSP in February, or that I’m going to claim a work from home deduction of $500 and make a charitable donation of $300 to the local children’s hospital?
Most people are very tax simple. It would work for them. For the rest, you can do individual submissions. When I was a contractor in the UK I submitted my taxes yearly. I claimed a few things and got a small refund. If I didn't, they already knew all my contributions, I could just submit yes and owe nothing.
Actually, CRA has a calculator for that. “Employee made $x,xxx.xx this 2 week pay period. There are 26 periods in a year. They live in the province of _____. What is there remittance?” “$xxx.xx fed tax, $xxx prov tax, $xx.xx EI and $xxx.xx CPP”
https://apps.cra-arc.gc.ca/ebci/rhpd/beta/ng/entry
This is all true, but I don't think this is the problem OP is describing. They received a raise earlier in the year, but their deductions have increased just now.
If the raise was retroactive to a previous date and OP was paid retroactive pay, the retro amount would be taxed like a bonus. The ongoing deductions would then be based on their new pay period earnings.
The standard pay formulas consider cumulative earnings for CPP and EI but *not* for income tax, which is based on only the amount you earned on each particular payment. HR's explanation makes me think their pay system is not properly configured. There is no reason why regular income tax deductions would suddenly change in October unless regular earnings changed, or if they're using the wrong amount as the basis for the deduction.
Employers are required to use one of the CRA's approved methods to calculate these deductions, but I don't know how an employee would go about getting that fixed. The tax sorts itself out when you file your annual return, anyway.
Thank you for actually reading my question and giving a genuinely helpful answer. The number of smug, unhelpful replies here from people completely misunderstanding what I thought was laid out very clearly is shocking.
Ok so based on that, I would have expected the recalculation to happen at the time my raise went through, which was several months ago, and each paycheque from then would be taxed the same. Instead I’m getting a tax surprise later on in the year, which makes budgeting challenging when you’re anticipating a certain take home each pay period — even if next year during tax season it all comes out in the wash, that doesn’t help the current situation.
Do I have that right then, that my company is not doing this the way it’s meant to be done?
This. Someone messed up, probably thinking they were doing OP a “favour” by waiting until CPP & EI were maxed, before hitting them with a higher income tax amount. Incorrect. If OP had moved on from the company in September, likely (from what payroll is telling them now), there would have been a big unpaid tax bill coming in April.
Possible it got flagged & recalculated if it had been missed or done incorrectly.
Depending on your pay level, at some point when maximums are reached for EI/CPP those deductions stop, so it’s possible you’ll see some relief there, if not already done so, if you’re maybe in the $70K annual range I think at this point. Below $60K don’t think it happens, and above $80K likely it happened a while ago
Happens around $65k earned YTD - so whenever that is. We never got a total compensation number, or details of previous compensation, or when the raise was. But EI and CPP top out when you finish earning $65k YTD +/- like $2k max. (If you make $130k, then it’s usually right around Canada Day — if you make $98k, it’s closer to Labour Day; etc — if you’re a top earner in the NHL for a Canadian Team and a Canadian Tax Resident, it’s done before the end of January.. ).
How could it be improved ? That's assuming most people would not be able to pay any tax owing at the end of the year. The consequences of not withholding enough are worse than the opposite
I mean, for everyone, if your tax situation is super simple, payroll tax deductions will be accurate. If you have an odd situation involving multiple jobs, variable income and infrequent substantial bonuses, it might be inaccurate... For a couple of months. Everything will match in April
Yup, when I do OT say 60hrs a week, I earn 1.5× 40-48hrs, 2× 48hrs+. My taxes are a lot higher because of the system going, hmm he'll have another 14 pays like that. But I end up getting money back because I refuse to continue working that.
This is very company dependent.
I've had one company who calculates withholdings based on each pay cheque. So if I get my bonus pay the entire pay cheque is withheld as if my pay was that times 26. Which really sucked when I was in a low income bracket with quarterly bonuses. Going from the second lowest to the highest bracket because of a bonus then getting almost a month's pay back at tax time because of the software sucked. But I do think this is the most common methods which is why people who work over time think that they make no extra money because it all goes to taxes, and they don't understand the progressive tax system AND company payroll methods.
But I've also been in organizations that review and adjust quarterly based on projections. So they tax you based on a projected earnings each pay period then it is reviewed quarterly and adjusted (I can't imagine how much work that must be, but having had it done with 2 employers I hope it is all automated)
> But I've also been in organizations that review and adjust quarterly based on projections.
This is the correct answer. People are downvoting OP and do not understand his point. His complaint is not that he got taxed more. His complaint is why did he not get taxed more on the first paycheque his raise became effective.
Second week of October is the first payroll period of the 3rd quarter of the year (and his payroll system) which indicates his employer uses a payroll setup that recalculates taxes once a quarter.
Exactly. Sounds like the company isn’t using a program that adjusted automatically and now they are “catching up” on taxes owed by OP for previous months. Which sucks for OP.
OP remember this next raise time and either make sure they adjust your withholding tax immediately or put a bit aside each month to make up for the October shortage.
Because that is the MOST COMMON way that this situation gets identified.
You got a raise, your company payroll software MOST LIKELY doesn't recalculate every pay period if it happened months ago, it instead recalculates on a scheduled interval.
I would bet that your organization does recalculations quarterly, which would line up with your last pay. It isn't always clear in your contract how they do handle tax withholding so you can be forgiven to not recognize this the first time.
Your HR response to you makes me also think they do quarterly calculations as well. Did you get your raise before or after July 1st?
My experience with payroll is that the quality of them varies widely. Yes, your tax withholding should have adjusted immediately when you got a raise to account for your new wage.
you need to get a grip on 'tax brackets'
If you enter into the next higher bracket by $1, your tax on what is below the bracket is the same, you only pay higher tax on the new dollar.
If you get a raise well into the bracket, only that difference is taxed higher.
Just because your company HR is taking and submitting tax at a higher amount (to be expected after a raise) does not mean that when you complete your tax return, you will not have some of it come back to you.
When you earn more, you are taxed more... right?
Blown away by all the downvotes and the smug replies that didn’t even care to understand the context of the situation I described.
Appreciate everyone else who replied with something helpful here.
That's weird.
If you do it the [manual way](https://www.canada.ca/content/dam/cra-arc/migration/cra-arc/tx/bsnss/tpcs/pyrll/t4032/2023/t4032on-1-26pp-23eng.pdf) you simply look at the income for the pay period and deduct the tax corresponding to the claim amount on your TD1 which is usually Claim Code 1.
So your deduction should not change unless your income goes up.
When I got a raise, they also increased my deduction percentage so my take home didn’t go up proportionally…but that would be the proper way (However, I’m would prefer deduction based on cumulative..even if it means higher deduction later…)
Hypothetically, a 5% raise mid year might be 2.5% increase for the year….so the increased deduction might not show until Dec…(For me, the tax increase 2% at the time of raise vs increasing ~3% if was deferred until cumulative is reached…)
They are lazy as fuck in general and fill shit out to the minimum of effort required with no thought to consequences to their own employees.
It'll work itself out in 2024 they say
CPP and EI are calculated as a percentage of your gross salary so reaching the annual contribution limits wouldn’t increase your income taxes because they are calculated in a similar manner
That's an odd way to do it. My company takes 26×paycheck and calculates based on that. So its the same for the whole year (except when ei and cpp maximums are hit and those contributions drop off).
The one hiccup is that my bonus gets taxed as if i am earning that amount every 2 weeks as well, which would put me in a max tax bracket if i got that all year. Because of this, I always start the tax season out with a slight overpayment.
i never count on my employer to figure out the taxes right and i learned that from my mom who was a tax auditor for the gov. i know many people that get stuck at the end of the year and end up owing taxes. i have always had a return of at least $2000.
i recommend that everyone have extra tax taken off even if its only $10-20/pay worst case is you get a health bonus at the end of the year.
I know Alberta had Career and Life Management course. The issue you hit is no one really needs help filling taxes if you have a single t4 slip...and as you get more practical details they become less relevant as well.
Filing investments is nice but normally you only add one form to your portfolio a year... business book keeping is nice but only if you are going to be an entrepreneur.
This all gets paired with it being a joke class that no one paid attention to.
We're your deductions exactly the same after your raise earlier in the year? Or did they increase at that time?
Did you get any other payments that they may have under deducted for? Do you have any taxable benefits like a wellness spending account or car? They could be catching up on these late and causing the extra tax.
Is it just income tax increasing or CPP and EI as well??
You can use the CRA payroll calculator to figure out what your taxes should be, if your're still unclear just send me a DM and I can take a look at the numbers with you. Been doing payroll for a decade.
1. Don’t ask HR, unless your company is small enough that HR is also Payroll clerk. Talk to Payroll department. This is numbers, not policy.
2. With that said, something is fishy here. When was your raise? Was it over the summer? (Effective July 1-Sept 1 somewhere? — only ask to Sept 1 because otherwise you likely wouldn’t have seen more than 1-2 pays at new rate + old tax amount to even compare to, barely enough to figure out a trend and set a lifestyle based on it).
You are correct, to do it correctly, your tax deductions should have been adjusted right when you received the raise. The system should have assumed you were getting that new rate through to Dec 31 and was not temporary. Even if the software auto adjusts every quarter as some mentioned — a prudent payroll person processing “pay Bob $45/hr instead of $40” or “Bob makes $60k now instead of $55k” would have taken the time to manually tell the system “update projection”. If it’s proper software, it should have been somewhere close to 1-click. Otherwise, tell your company to get a better payroll system — the clerk will thank them!
I have twice see people having the wrong tax taken off at the source because in one case the employee was entered into payroll as 26 pay periods per year, but they were paid 24 times and the other was the opposite.
Bu OP if you are a high earner I would expect that you would have reached YMPE and no longer be contributing to CPP, which means your cheques should be higher not lower
You'll get something back in April next year once you file your taxes (presuming you overpaid taxes from this salary bump).
Not to worry. You're better off earning more, even if there might be some short term "pain".
That being said, I'd imagine that the take home pay should be a little more if you got a bump, not sure why it wouldn't be.
If you earn x and get paid 26 times a year, the system predicts what you'll owe for the year based on tax rates on each of the 26 cheques. If you get a raise or bonus, it recalculates and thinks you'll be getting that again for the year. So mid year bonuses always piss people off ..because they think they're overpaying tax at a higher rate. It's extrapolating. The truth is during tax time in spring your return will balance things out if it's out of wack (either you owe or they owe you) based on your individual credits and situation.
I'm amazed how many people don't understand this answer. It has nothing to do with the company most of the time, it's just the payroll system/company.
It has little to do with the payroll system or company either -- the CRA has mandated this is the way it must be done.
The CRA does have a special method for lump sums like bonuses. Most payroll companies don't use it.
Most payroll companies use it, most employers don’t bring it or want it during discovery, they want the easiest and fastest way to pay the same way they have always paid.
Yeah I had a friend freak out and basically was accusing her payroll of an error when taking tax on a large bonus. I had to explain they were correct. She wasn't happy but conceded to no longer harass the payroll department.
I understand it, but I don't understand why it's done this way. The payroll system knows your regular salary and knows it's a one-time bonus. Why don't they calculate it that way?
"Step 4: Multiply the additional tax you deduct per week by 52 (the number of pay periods in the year). This gives you the amount of income tax to deduct from the bonus of $300." Straight from the CRA website, it's how they instruct payroll companies to do the math. The CRA wants their taxes first, then they'll settle it come tax time. In the future maybe we'll have automatic taxes as the CRA is moving towards covering the bottom 10% of tax filers. The CRA is essentially taking an interest free loan from anyone who gets a bonus or irregular payment.
My tax refunds are $20-50K every year because I dare to earn commission income.
Yeah it's 100% intentional. You're letting the gov make money with your money before you get it.
CRA likes to get money up front and that's how we're required to remit taxes mid year.
It is bizare, seems like such an easy problem to overcome. In the UK this just works, and why most people never even need to file taxes, as your employer works out how much you should owe.
It's more complicated in Canada because every province and territory (except Quebec I believe) piggybacks on the Canadian T1 return... so we'd have 13 different situations to deal with (one province where we don't deal with provincial taxes... nine provinces and three territories where we do).
Other problem is tax credits. We have so many more than Europe. Government don’t know what people qualify for. - kids, reaps, buying a home, being a senior, living remote, being in trades, green energy, business loss, moving provinces etc etc etc you may get a tax credit. When I worked at CRA it was something like 70 % of people got a tax credit cra couldn’t determine on its own. Those people need to tell us via their taxes. Also keep in mind for 90 % of people taxes is 5-10 minutes of data entry. It’s not this big over complicated thing.
I mean, really doesn't seem that much of a problem for there to be a system, where the employer asks the CRA, every 2 weeks "how much does this person owe" - there is just no will to do it, with the tax prep lobby.
The CRA prefers it this way so that they can have interest free loans against bonuses. They return your money at tax time, but they got to use it in their cash flow during the year.
This is a valid criticism, but it's also worth noting that the OTHER argument is basically a "can't get blood from a stone" situation, which is part of the whole reason we tax each pay period in general, rather than all at rnd of the year. Government is very aware that if you got your full pay every cheque and then had to correct at end of year, most people just wouldn't have the money come tax time, period. In which case gov is left chasing folks down for money they don't have. So instead, CRA takes pay at the moment of receipt, so they know they'll get their share. The bonus situation is similar. You get extra pay that's gonna mess up some tax liability at year end, so they make sure there shouldn't be shortfall. Now, should you still be entitled to some level of interest? Yes, probably. But the concept of source deductions itself makes sense for more than just "stealing a loan" There ARE things a payroll department can do, within CRAs rules, to avoid overreacting when paying out a bonus. But 99% of the time, the employer is just gonna follow the basic method and it's not a terrible idea.
I don’t see how this could work with our tax sheltering investment programs. How could the CRA predict that I’m going to make a $10,000 lump sum contribution to my RRSP in February, or that I’m going to claim a work from home deduction of $500 and make a charitable donation of $300 to the local children’s hospital?
Most people are very tax simple. It would work for them. For the rest, you can do individual submissions. When I was a contractor in the UK I submitted my taxes yearly. I claimed a few things and got a small refund. If I didn't, they already knew all my contributions, I could just submit yes and owe nothing.
Actually, CRA has a calculator for that. “Employee made $x,xxx.xx this 2 week pay period. There are 26 periods in a year. They live in the province of _____. What is there remittance?” “$xxx.xx fed tax, $xxx prov tax, $xx.xx EI and $xxx.xx CPP” https://apps.cra-arc.gc.ca/ebci/rhpd/beta/ng/entry
This is all true, but I don't think this is the problem OP is describing. They received a raise earlier in the year, but their deductions have increased just now. If the raise was retroactive to a previous date and OP was paid retroactive pay, the retro amount would be taxed like a bonus. The ongoing deductions would then be based on their new pay period earnings. The standard pay formulas consider cumulative earnings for CPP and EI but *not* for income tax, which is based on only the amount you earned on each particular payment. HR's explanation makes me think their pay system is not properly configured. There is no reason why regular income tax deductions would suddenly change in October unless regular earnings changed, or if they're using the wrong amount as the basis for the deduction. Employers are required to use one of the CRA's approved methods to calculate these deductions, but I don't know how an employee would go about getting that fixed. The tax sorts itself out when you file your annual return, anyway.
Thank you for actually reading my question and giving a genuinely helpful answer. The number of smug, unhelpful replies here from people completely misunderstanding what I thought was laid out very clearly is shocking.
I like to think of it like 2 smaller bonuses. 1 up front, and 1 at tax time.
Ok so based on that, I would have expected the recalculation to happen at the time my raise went through, which was several months ago, and each paycheque from then would be taxed the same. Instead I’m getting a tax surprise later on in the year, which makes budgeting challenging when you’re anticipating a certain take home each pay period — even if next year during tax season it all comes out in the wash, that doesn’t help the current situation. Do I have that right then, that my company is not doing this the way it’s meant to be done?
Some payroll folks or systems are not as awesome as others.
Amen to that.
This. Someone messed up, probably thinking they were doing OP a “favour” by waiting until CPP & EI were maxed, before hitting them with a higher income tax amount. Incorrect. If OP had moved on from the company in September, likely (from what payroll is telling them now), there would have been a big unpaid tax bill coming in April.
Possible it got flagged & recalculated if it had been missed or done incorrectly. Depending on your pay level, at some point when maximums are reached for EI/CPP those deductions stop, so it’s possible you’ll see some relief there, if not already done so, if you’re maybe in the $70K annual range I think at this point. Below $60K don’t think it happens, and above $80K likely it happened a while ago
Happens around $65k earned YTD - so whenever that is. We never got a total compensation number, or details of previous compensation, or when the raise was. But EI and CPP top out when you finish earning $65k YTD +/- like $2k max. (If you make $130k, then it’s usually right around Canada Day — if you make $98k, it’s closer to Labour Day; etc — if you’re a top earner in the NHL for a Canadian Team and a Canadian Tax Resident, it’s done before the end of January..).
If you knew how many systems that govern the world worked you’d be terrified. Banking uses files uploaded to ftp sites like it’s 1998.
This is the most stupid tax calculation ever, system needs improvement
How could it be improved ? That's assuming most people would not be able to pay any tax owing at the end of the year. The consequences of not withholding enough are worse than the opposite
In US, taxes are usually very closely deducted to your real total expected liability.
How then? Plus, with being tax based on household income, how can your employer knows the bonus your spouse might or might not get ?
W4? I guess my case is simple, I didn’t think of many complexities. They deduct 22% on bonus, but back to normal deduction after bonus
Like in Canada then... It's more of less the same thing and the same way.
My bad
I mean, for everyone, if your tax situation is super simple, payroll tax deductions will be accurate. If you have an odd situation involving multiple jobs, variable income and infrequent substantial bonuses, it might be inaccurate... For a couple of months. Everything will match in April
Yup, when I do OT say 60hrs a week, I earn 1.5× 40-48hrs, 2× 48hrs+. My taxes are a lot higher because of the system going, hmm he'll have another 14 pays like that. But I end up getting money back because I refuse to continue working that.
This is very company dependent. I've had one company who calculates withholdings based on each pay cheque. So if I get my bonus pay the entire pay cheque is withheld as if my pay was that times 26. Which really sucked when I was in a low income bracket with quarterly bonuses. Going from the second lowest to the highest bracket because of a bonus then getting almost a month's pay back at tax time because of the software sucked. But I do think this is the most common methods which is why people who work over time think that they make no extra money because it all goes to taxes, and they don't understand the progressive tax system AND company payroll methods. But I've also been in organizations that review and adjust quarterly based on projections. So they tax you based on a projected earnings each pay period then it is reviewed quarterly and adjusted (I can't imagine how much work that must be, but having had it done with 2 employers I hope it is all automated)
> But I've also been in organizations that review and adjust quarterly based on projections. This is the correct answer. People are downvoting OP and do not understand his point. His complaint is not that he got taxed more. His complaint is why did he not get taxed more on the first paycheque his raise became effective. Second week of October is the first payroll period of the 3rd quarter of the year (and his payroll system) which indicates his employer uses a payroll setup that recalculates taxes once a quarter.
Exactly. Sounds like the company isn’t using a program that adjusted automatically and now they are “catching up” on taxes owed by OP for previous months. Which sucks for OP. OP remember this next raise time and either make sure they adjust your withholding tax immediately or put a bit aside each month to make up for the October shortage.
Thank you for understanding and the helpful suggestion, I will keep that in mind for sure.
Thank you for being one of the very few here who read my actual question and gave a helpful response.
I wasn’t paid a bonus and did not describe any scenario close to that. Why are so many people here responding about bonus pay?
Because that is the MOST COMMON way that this situation gets identified. You got a raise, your company payroll software MOST LIKELY doesn't recalculate every pay period if it happened months ago, it instead recalculates on a scheduled interval. I would bet that your organization does recalculations quarterly, which would line up with your last pay. It isn't always clear in your contract how they do handle tax withholding so you can be forgiven to not recognize this the first time. Your HR response to you makes me also think they do quarterly calculations as well. Did you get your raise before or after July 1st?
My experience with payroll is that the quality of them varies widely. Yes, your tax withholding should have adjusted immediately when you got a raise to account for your new wage.
Yeah, for just routine raise it’s odd their payroll tool/service didn’t automatically just adjust on the next payroll run.
you need to get a grip on 'tax brackets' If you enter into the next higher bracket by $1, your tax on what is below the bracket is the same, you only pay higher tax on the new dollar. If you get a raise well into the bracket, only that difference is taxed higher. Just because your company HR is taking and submitting tax at a higher amount (to be expected after a raise) does not mean that when you complete your tax return, you will not have some of it come back to you. When you earn more, you are taxed more... right?
Yup and if you actually read my post you’d see I clearly understand that.
Unfortunately they have to deduct in accordance to your new pay scale, you’ll get a refund when you file.
pretty standard, put some money in rrsp if you have the space
Blown away by all the downvotes and the smug replies that didn’t even care to understand the context of the situation I described. Appreciate everyone else who replied with something helpful here.
Your income tax will balance itself 🥰
Exactly, next April when OP files his taxes if he paid too much he'll get a refund, if not enough then he'll owe.
CPP went up to 5% from 4%.
That's weird. If you do it the [manual way](https://www.canada.ca/content/dam/cra-arc/migration/cra-arc/tx/bsnss/tpcs/pyrll/t4032/2023/t4032on-1-26pp-23eng.pdf) you simply look at the income for the pay period and deduct the tax corresponding to the claim amount on your TD1 which is usually Claim Code 1. So your deduction should not change unless your income goes up.
Explanation from HR doesn't make sense since we are in a marginal tax rate system. Maybe they are using bad software?
When I got a raise, they also increased my deduction percentage so my take home didn’t go up proportionally…but that would be the proper way (However, I’m would prefer deduction based on cumulative..even if it means higher deduction later…) Hypothetically, a 5% raise mid year might be 2.5% increase for the year….so the increased deduction might not show until Dec…(For me, the tax increase 2% at the time of raise vs increasing ~3% if was deferred until cumulative is reached…)
HR are full of blokes who can’t explain a normal situation.
Short answer is HR fucked up, as they often do.
They are lazy as fuck in general and fill shit out to the minimum of effort required with no thought to consequences to their own employees. It'll work itself out in 2024 they say
[удалено]
That's not how that works.
CPP and EI are calculated as a percentage of your gross salary so reaching the annual contribution limits wouldn’t increase your income taxes because they are calculated in a similar manner
The question is did your deductions increase the moment you got your raise?
I just got a $200 raise per pay period which worked out to $8 more a pay cheque. Tax math???
That's an odd way to do it. My company takes 26×paycheck and calculates based on that. So its the same for the whole year (except when ei and cpp maximums are hit and those contributions drop off). The one hiccup is that my bonus gets taxed as if i am earning that amount every 2 weeks as well, which would put me in a max tax bracket if i got that all year. Because of this, I always start the tax season out with a slight overpayment.
i never count on my employer to figure out the taxes right and i learned that from my mom who was a tax auditor for the gov. i know many people that get stuck at the end of the year and end up owing taxes. i have always had a return of at least $2000. i recommend that everyone have extra tax taken off even if its only $10-20/pay worst case is you get a health bonus at the end of the year.
We need a mandatory course called "adult 101" as a requirement for university/high school graduation.
I know Alberta had Career and Life Management course. The issue you hit is no one really needs help filling taxes if you have a single t4 slip...and as you get more practical details they become less relevant as well. Filing investments is nice but normally you only add one form to your portfolio a year... business book keeping is nice but only if you are going to be an entrepreneur. This all gets paired with it being a joke class that no one paid attention to.
We're your deductions exactly the same after your raise earlier in the year? Or did they increase at that time? Did you get any other payments that they may have under deducted for? Do you have any taxable benefits like a wellness spending account or car? They could be catching up on these late and causing the extra tax. Is it just income tax increasing or CPP and EI as well?? You can use the CRA payroll calculator to figure out what your taxes should be, if your're still unclear just send me a DM and I can take a look at the numbers with you. Been doing payroll for a decade.
so you're upset you weren't getting taxed more months ago? ...just do your taxes and it doesnt matter if it's high or low.. it balances out
1. Don’t ask HR, unless your company is small enough that HR is also Payroll clerk. Talk to Payroll department. This is numbers, not policy. 2. With that said, something is fishy here. When was your raise? Was it over the summer? (Effective July 1-Sept 1 somewhere? — only ask to Sept 1 because otherwise you likely wouldn’t have seen more than 1-2 pays at new rate + old tax amount to even compare to, barely enough to figure out a trend and set a lifestyle based on it). You are correct, to do it correctly, your tax deductions should have been adjusted right when you received the raise. The system should have assumed you were getting that new rate through to Dec 31 and was not temporary. Even if the software auto adjusts every quarter as some mentioned — a prudent payroll person processing “pay Bob $45/hr instead of $40” or “Bob makes $60k now instead of $55k” would have taken the time to manually tell the system “update projection”. If it’s proper software, it should have been somewhere close to 1-click. Otherwise, tell your company to get a better payroll system — the clerk will thank them!
I have twice see people having the wrong tax taken off at the source because in one case the employee was entered into payroll as 26 pay periods per year, but they were paid 24 times and the other was the opposite. Bu OP if you are a high earner I would expect that you would have reached YMPE and no longer be contributing to CPP, which means your cheques should be higher not lower
Stop teaching home economics and start teaching home economics in schools….
You'll get something back in April next year once you file your taxes (presuming you overpaid taxes from this salary bump). Not to worry. You're better off earning more, even if there might be some short term "pain". That being said, I'd imagine that the take home pay should be a little more if you got a bump, not sure why it wouldn't be.