Chapter 4

Question 1

CRA’s mandate is to:

Answer 1

collect revenues and administer tax laws for the federal government and for most provinces and territories
deliver various social and economic benefit incentive programs to Canadians

Question 2

Canada Revenue Agency (CRA)

Answer 2

a federal government agency that manages the following business lines for the federal government:
tax services
benefit programs

Question 3

CRA measures compliance in the following areas:

Answer 3

Filing
Registration
Remittance
Reporting

Question 4

CRA’s program responsibilities related specifically to payroll include

Answer 4

Canada Pension Plan (CPP) (shared with ESDC and Service Canada)
Employment Insurance (EI) (shared with ESDC and Service Canada)
Income taxation

Question 5

If an organization fails to deduct and remit the amounts withheld from employees for CPP, EI and income tax, it may be left in the position of …

Answer 5

paying both the employee’s and employer’s portion and will be subject to penalties

Question 6

Payroll administrators need to have a clear understanding of how and when to make …

Answer 6

required deductions and remittances to avoid penalties and interest charges.

All monies deducted on behalf of CRA must be held “in trust” for the Receiver General`

Question 7

Employment and Social Development Canada (ESDC)

Answer 7

Formerly HRSDC

A department of the Government of Canada committed to building a stronger and more competitive Canada by supporting Canadians in making choices that help them live productive and rewarding lives and to improve their quality of life.

Question 8

ESDC

Answer 8

develops policies that make Canada a society in which Canadians can use their talents, skills and resources to thrive in the competitive market and contribute to their well-being
creates programs and support initiatives that help Canadians invest in themselves to move through life’s transitions—from families with children to seniors, from school to work, from one job to another, from unemployment to employment, from the workforce to retirement
creates better outcomes for Canadians through service excellence with Service Canada and other partners

Question 9

ESDC supports human capital development, labour market development and is dedicated to establishing a culture of lifelong learning for Canadians. Some of their specific program responsibilities include:

Answer 9

Canada Pension Plan and Old Age Security
Employment Insurance
Employment Programs
Youth Employment Strategies
Canada Education Savings Program
Canada Student Loans and Grants

Question 10

Service Canada (SC)

Answer 10

Service Canada was created in 2005 to provide easy-to-access personalized service to Canadians

The agency integrates services from a number of federal departments to form a service delivery network

Service Canada serves as the government’s operational arm while ESDC operates as the policy-making body

Question 11

3 man areas CRA is responsible for

Answer 11

CPP
EI
Income Tax
(Must be taken off in this order. Remember Alphabetically)

Question 12

Some of Service Canada’s program responsibilities are:

Answer 12

the issuance of Social Insurance Numbers (SIN) and the protection and security of SIN information

the delivery of services to employers, including Record of Employment on the Web

the administration of Employment Insurance programs, including regular, parental, sickness, seasonal and compassionate care benefits

the administration of the Employment Insurance Premium Reduction program, including granting qualified employers a reduced Employment Insurance premium rate

the administration of Canada Pension Plan benefits, including retirement, disability, survivor, children’s and death benefits

the administration of benefits for seniors, including the Old Age Security Program and the Guaranteed Income Supplement

Question 13

Canada Pension Plan

Answer 13

The purpose of the act is to provide protection to contributors and their families against the loss of income due to retirement, disability and death

The pension is designed to replace about 25 percent of the earnings on which a person’s contributions were based to a maximum monthly pension benefit of $1038.33 in 2014.

Question 14

Contributions from payroll withholdings for employees:

Answer 14

Over the age of 18
Under the age of 70
Not receiving disability benefits under the Canada Pension Plan or Quebec Pension Plan

Employers match employee contributions 1:1

Question 15

Canada Pension Plan contributioncalculation

Answer 15

Gross Earnings
Less: non-taxable allowances
Less: amounts paid on termination
Plus: taxable benefits

= Pensionable Earnings
Less: pay cycle exemption

= Contributory Earnings
X 4.95%

= Canada Pension Plan contribution

Question 16

Canada Pension Plan Employer

Answer 16

Employer matches the contribution and submits both the employee and employer amount to CRA

Question 17

Employment Insurance Premiums

Answer 17

Employment Insurance is the program with the greatest impact on payroll

This program provides temporary financial assistance for unemployed Canadians while they look for work or upgrade their skills

Question 18

EI may also provide

Answer 18

sick benefits
maternity and/or paternity benefits
compassionate care benefits

Question 19

Payroll is responsible for deducting and remitting EI premiums on

Answer 19

behalf of employees and the employer

They are also responsible for capturing information related to insurable earnings and hours for the Record of Employment

Question 20

Contributions are based on Insurable Earnings calculated as:

Answer 20

Gross Earnings
Less:
Non-taxable allowances
Non-cash benefits
Earnings related to termination of employments
= Insurable Earnings

Premium is Insurable Earnings x 1.88% to an annual maximum of $930.60

Question 21

TD1: The Personal Tax Credits Return

Answer 21

There are 12 federal tax credit amounts that can be claimed on the TD1. For the purposes of this course, students are required to know and understand these credits.

Question 22

Basic personal amount

Answer 22

Every Canadian resident can claim this amount. If no additional credits are being claimed then the basic amount will provide the minimum tax credit deduction.

The basic personal amount is set by the government on an annual basis.

Question 23

Taxes withheld for each pay cycle is based on:

Answer 23

Net taxable income

Employee’s Personal Exemptions claimed on a TD1

Question 24

Taxes can be calculated using:

Answer 24

Manual calculations
Payroll deduction tables
Payroll Deduction Online Calculator (PDOC)
CRA provided tables for payroll software

Question 25

Gross taxable income is calculated as:

Answer 25

Gross earnings
Less non-taxable allowances
Plus taxable benefits

Question 26

Net taxable income is:

Answer 26

Gross taxable income less:
Employee deductions for Registered Pension Plan
Employee deductions for RRSP contributions
Union dues withheld
Other CRA approved deductions

Question 27

Income Tax Deducted – Tax Tables

Answer 27

Tables are prepared by the CRA on a minimum of once a year unless there are any changes. Since they are pre-calculated and figures are rounded – these tables are often not truly accurate.

Question 28

Income Tax Deducted – PDOC

Answer 28

PDOC = Payroll Deduction Online Calculator

This method is used predominantly in practice for small businesses who do not have their own payroll software.

PDOC provides the information for all statutory deductions