Economical Regulation 102 Payroll Withholding Waiver for Canadian Businesses

Yes. Severance is taxable in the year you receive it, and the employer withholds tax before paying it out. Amounts paid as salary continuance are taxed like regular employment income. A single lump sum has a flat withholding rate applied, which is only a prepayment against the tax finally calculated on your return, so a balance can still be owing. Part of a retiring allowance may qualify for a direct transfer to an RRSP, which defers the tax.

There is no standard amount. The refund equals tax withheld and instalments paid, less the tax calculated on the return after deductions and credits, so two people on the same salary can end up with very different results. Payroll withholding that ran higher than needed, RRSP deductions, tuition and medical claims and spousal transfers all push the figure up. The notice of assessment confirms the final number once the return is processed.

Take-home pay is gross pay minus federal and provincial income tax withheld, CPP or QPP contributions and EI premiums, along with anything else your employer deducts such as pension or benefit amounts. Because income tax is graduated, the share withheld rises as earnings rise, and the provincial portion depends on where you live. The CRA payroll deductions calculator produces an accurate figure once you enter pay, province and claim codes. Withholding on a bonus follows a separate method and evens out when you file.

Withhold three things from each pay: income tax, CPP and EI. For 2026, CPP is 5.95% from the employee and 5.95% from the employer on pensionable earnings between the $3,500 basic exemption and the $74,600 ceiling, plus CPP2 at 4% up to $85,000. EI is $1.63 per $100 of insurable earnings for the employee, and the employer pays 1.4 times that. Use the CRA payroll deductions online calculator, then remit by your assigned due date.

If you are incorporated, you can take salary, dividends, or a mix of both. Salary is deductible to the corporation, builds RRSP room and CPP entitlement, and requires payroll registration and regular remittances. Dividends need no payroll but come out of after-tax corporate income and create no RRSP room. Sole proprietors and partners simply draw money and pay tax on the business profit. The right mix depends on your cash needs and the corporation's tax position, so model both.

Yes. Licensed daycare, nursery school, day camp and after-school care generally qualify as child care expenses, deducted from income rather than claimed as a credit. The lower-income spouse normally has to make the claim, and the deduction is capped by the child's age and by that spouse's earned income. You need receipts showing the provider's name and, for an individual caregiver, their social insurance number. The CRA's child care expenses page carries the current limits.

Start at the CRA sign-in page and register for My Account. You can sign in through a participating bank as a sign-in partner, or create a CRA user ID and password. Registration asks for your social insurance number, date of birth, postal code and an amount from a recently assessed return, so have that assessment in front of you. There is also a document verification option that grants full access sooner. Filing at least one return first makes registration much easier.

Interest starts the day after your balance-due date and compounds daily until you pay. For the 2025 tax year, a personal balance was due 30 April 2026, so interest ran from 1 May 2026, including for self-employed filers whose return was not due until 15 June 2026. A corporation's balance is due two months after its year end, or three months for an eligible small-business corporation. The prescribed interest rate changes quarterly.

Add up income from every source first: employment, self-employment, pensions, investment income and the taxable one-half of capital gains for 2025 and 2026. Subtract deductions such as RRSP contributions, union dues, child care and eligible moving costs to reach net income, then subtract the remaining allowable deductions to arrive at taxable income. Tax is calculated on that figure, and non-refundable credits, including the 2026 federal basic personal amount of $16,452, then reduce the tax itself rather than the income.

Yes. EI benefits are taxable income and Service Canada withholds income tax from each payment. The amount held back is often less than you end up owing, because the withholding looks only at the benefit and ignores employment income you earned earlier in the same year. That is why many people who spent part of a year on EI owe a balance. You get a T4E slip and report the total on your return.

Your T4 reports income tax deducted in a box of its own, separate from employment income and separate from the CPP contribution and EI premium boxes. The employer works the figure out pay by pay and reports the year's total. If it looks wrong, total the tax withheld on your own pay stubs and ask the employer for an amended slip rather than changing the number when you file. The CRA also shows filed slips in My Account.

A reasonable per diem paid to an employee travelling away from the area where they ordinarily report to work is not a taxable benefit and is not reported as income; a per diem for ordinary local travel does not qualify, and a travel allowance paid to a salesperson is tested differently. It becomes taxable when it is not tied to real travel, covers personal living costs, or is generous enough to stop being reasonable, in which case it belongs on the T4. Keep dates, destinations and purpose on file. For the employer, the meal portion of the cost falls under the general limit on deducting food, beverages and entertainment, so only part of it is deductible including tax and tip; confirm the current percentage and the exceptions that apply to your industry before claiming it.