February 1, 2018 at 1:57 pm #8834AnonymousMember
Every year or two, my employer hands out TD1 forms for me to fill out and sign. I am a single parent, I just need to fill out #8, right? Nothing else? I’m thinking of starting a side business this year too. TIA!
JamieFebruary 1, 2018 at 2:09 pm #8835The Happy BookkeeperKeymaster
Hi Jamie! Great Question!
So, the TD1 Form (federal & provincial) is all about how much tax your employer takes off of your paycheque and passes on to CRA on your behalf. Everyone in Canada can make up to $11,635 without paying taxes on it! (That’s the basic personal amount for 2018). That is, if you were predicted to make less than $11,635, you wouldn’t owe any taxes on that!. Your employer needs to factor this non-taxed portion of your income in when calculating what taxes are to be deducted for you from your paycheque. The payroll software estimates, based on your pay amount and this TD1 form, what your taxes will be at the end of the year, and what to take off the paycheck to give to CRA for you so you don’t have a huge tax bill. (Paying ahead of the total you will likely owe).
People who have special circumstances can make a bit more before the taxes start. For example, people who have an infirm child, they can earn a little more before the taxes start, that is, $2,150 more. (#2 on this form) Etc Etc.
Now, when you’re married, and you are the sole income provider, (say your spouse is a stay at home parent), then that means you’re earning income for both your spouse and yourself! And so CRA says, “well, you can use their basic personal amount too! What they’re not using”. So that’s #8. And ALSO CRA says, “Well, if you don’t have a spouse you are supporting, but you do have a child you are supporting on your own, you can use their basic personal claim amount, as a special break because you are a single parent”. And that’s why you put in $11,635 in #8.
Why am I telling you all of this? Because if you put in $11,635 into #8, your employer will take less tax off of you. And if that was your only job, then your taxes at the end of the year will closely match what their system guessed based on this form, and you won’t owe too much more, and you won’t have given CRA too much throughout the year (an interest free loan to the government). BUT, if you love to get a refund at tax time (aka, a refund is your OWN money given back to you that was taken off your paycheque) and you don’t care that you just gave CRA an interest free loan… then leave #8 blank. It’s ok! In fact, if you are considering starting a business, and that business makes a profit this year, you will owe taxes on that ALSO, and no one is making tax installments on your behalf for that anywhere! (You can yourself though). So I would suggest leaving #8 blank!!! Less is more with these forms! The extra tax being taken off will just be applied to your 2018 business income, and reduce what you owe at the end of 2018.
That’s my personal approach to these forms. If you choose to put $11,635 in #8, then I would suggest to start a saving account that could be used in case you do owe taxes on 2018 business income, or any emergencies, whatever may come.
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