EPY CAN: Income Tax - Special Letters - F1 - What do You Enter? - (Doc ID 610228.1)

Last updated on APRIL 11, 2024

Applies to:

This document was previously published as Customer Connection Solution 700303

Symptoms

Employer receives a letter from CRA (Revenue Canada) which states
"We have approved your request to allow your employer or payer to reduce your income tax deductions at source for 2012"

 Where does the customer enter this amount for the employee?

 PeopleSoft indicates that it should be entered in the Special Letters field on the Canadian Income Tax Data 1 panel. (prorated based on the number of pays remaining in the year)

Customer replies that when they read the PeopleBooks documentation the Special Letters field is documented in the topic "Calculating Provincial Tax Reductions", therefore from the documentation it appears that  if they enter the amount in this field it will only reduce Provincial and not Federal Taxes.

Some letters will also have a K3 and K3P values.  What do we do with these?
 
ANSWER
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The PeopleBooks documentation is not correct and there has been a document bug created to change the verbiage in PeopleBooks.  The customer must enter this amount in the Special Letters field on the employee Canadian Income Tax Data 1 panel.

Amounts entered in this field correspond to the F1 factor in the Income Tax calculation which is used in the determination of "A" (Annual taxable income), and "A" is used in both the federal and provincial calculation. Therefore amounts entered in the Special Letters field will reduce both Federal and Provincial tax.

For letters with the K3 value this will go in the Other Tax Credits amount on the Canadian Income Tax Panel.

The K3P amount will go on the Provincial panel in the Other Provincial Credits (K3P) box.  You will also need to enter the Province and the Provincial Tax Credit amount as well.  Normally this is only required if the employee is claiming more than the personal exemption with the exception of Quebec.

EXAMPLE:
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To calculate the dollar amount to key into the Special Letters field, follow this formula.

Changes

Cause

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