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Canada - Commission Taxation (Doc ID 607733.1)

Last updated on NOVEMBER 26, 2021

Applies to:

PeopleSoft Enterprise HCM Payroll for North America - Version 9.2 and later
Information in this document applies to any platform.

Information in this document applies to any platform.



This document was previously published as Customer Connection Solution 43725


Symptoms



This resolution is provided to document how Commission Taxation works in the Canadian Payroll System.

1. Commission taxation is applied to Earnings that have the Commission radio button checked on, on Earnings Table 2.

2. If the Income Tax calculation  finds an Earnings that is designated to use the Commission Taxation method, it then looks at the TD1X values for Commission and Expenses entered on the Canadian Income Tax Data 1 panel.

3. The TD1X dollar values to be  entered for Commission and Expenses in these boxes is outlined on the Federal government     TD1X form, in summary the Commission box will contain the expected Salary and Commission for the year and the Expenses box will contain the expected annual Expenses.   (Please note that it will contain both anticipated annual salary and commission, not just commission).

4. As noted above, only earnings that have the commission taxation method will use the commission taxation method.   Regular earnings (using the Annualized Taxation method) for commission employees have taxation deducted based on the Annualized method not the Commission method.

5. The Commission Taxation method is documented in the Payroll Deductions Formulas for Computer programs.

6. The notes above apply to all provinces EXCEPT Quebec who use a different method for the determination of QIT (Quebec Income Tax).   (This will be documented in a further note).

7. SPECIAL CONSIDERATION -  The PeopleSoft Commission Taxation method should be used when Commission is paid each pay period, if Commission is not paid each pay period then the Bonus Taxation method should be used.   This procedure conforms with  Revenue Canada documentation.

FROM THE CPA TRAINING MANUAL:

7. If an employee is paid on a commission basis, or a salary plus commission basis, tax is deducted using one of the following two ways:
i:  Employees who earn commission without incurring expenses:
    Many employers pay commissions to employees in addition to a regular salary.   In a large number of cases, the employee does not incur any expenditure in earning the commissions.   If the commissions are regularly disbursed to the employee at the time the salary is paid, the amount of the commission may be added to the salary amount and the regular tax table method utilized.   If, however, commission payments are irregular, the bonus method may be used to determine the tax withholding on the commission payment.

ii:  Employees who incur expenses while earnings commission:
    Employees who personally incur expenses while earning the commission have the option of completing an RCCET for TD1X - Statement of Remuneration and Expenses.  The purpose of the TD1X is to allow the employee to claim the amount of his/her expenses at source instead of waiting until he/she files his/her personal tax return.   Employees falling into this category, who do not complete and submit a TD1X, have tax calculated according to  i) above.

 

8. Quebec Commission Taxation
    In addition to the TD1X which affects the federal tax calculation, an employee employed in the province of Quebec, who personally incurs business expenses while earning commissions, may elect to file the MRQ form MR-19.C-V - Statement of Commissions and Expenses for Source Deduction Purposes.  Unlike the TD1X, which is used to establish a percentage of net taxable income to be deducted for tax purposes, the  MR-19.C-V establishes the percentage of commissions to be included when calculating the employee's Quebec provincial tax liability.


    The MR-19.C-V asks the employee to report his/her actual commissions for the previous year, or an estimate for the current year, and his/her eligible expenses.  The percentage of commissions to be included in calculating the employee's Quebec provincial tax liability is computed using the following formula

Changes

 

Cause

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