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T4 Doesn't Add Up

ImageSometimes your employer may not have things set up correctly. They may deduct too much tax, or too little tax. I recently had a customer come in with their T4 slip to get their taxes prepared. When I entered just the T4 information,it showed she owed quite a bit of tax.

This tells me that her employer has not set up their payroll correctly. In an ideal situation, at the end of the year, with just your T4 information you should be in a tax neutral state - ie you neither owe tax nor will you get a refund.


The problem with my client was that her employer did not collect sufficient tax during the year. Fortunately she did purchase sufficient RRSPs so that her taxable income was reduced and there was no tax owing.

The solution to this is via the TD1 form (see other article). You fill this in and provide it to your employer. They adjust their payroll settings, and keep the form on file. Then at the end of the year you should be in the desirable tax neutral state.

Don't assume that your employer will be able to get it right, and fill in a new TD1 form each year to make sure it stays right. Also, if you expect other income or deductions during the year, you can adjust for that in your TD1 form.

A good way to stay under the radar is to have just about the right tax collected during the year so that you do not have either large amounts owing or a large refund due.

As to my client, I gave her a TD1 form (and also a provincial TD1 form) to complete and give to her employer for this year.


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