TD1 Forms: A Complete Guide for Employers and Employees
TD1 forms are essential business documents. PandaDoc provides a range of TD1 templates, both federal and provincial (for numerous years), thus allowing employers to create and host their own custom TD1s. This approach saves significant amounts of time and money.
What is a “TD1” or “Personal Tax Credits Return”?
A TD1, also called a Personal Tax Credits Return, is an important tax document issued by the Canada Revenue Agency (CRA). It must be completed by all employees in an organization and outlines tax credit entitlements.
When an employer performs recurrent payroll duties (usually on a monthly basis), they will consult the information provided in their employees’ TD1 forms and use it to make applicable tax deductions. This ensures that the CRA receives the correct amount of tax. It is the responsibility of the employer, usually in the form of the Accounting or Human Resources (HR) department, to store worker information securely.
Because TD1 forms only cover earnings related to one job, individuals may need to pay additional tax at the end of the year when they submit their annual tax return. Not all tax credits are covered by the TD1 form. It may be necessary for employees to complete additional documents to claim all the deductions to which they are entitled.
What are the differences between federal and provincial TD1 forms?
There are two different types of TD1s – provincial and federal forms. The term “TD1” refers to the national document that all employees resident in Canada must complete.
Additional TD1 forms apply to specific provinces. These are labeled with extra letters. For example, “TD1NB” refers to “TD1 New Brunswick” and “TD1ON” is an abbreviation for “TD1 Ontario”.
If you are an employee, you will need to complete both a federal and a provincial form and submit it to your employer. The reason for this is that federal and provincial tax rates and credits differ. You should fill out a provincial form based on where you live, not where you work.
Like federal TD1 forms, new provincial TD1s are issued every year to reflect changes in taxes. All provincial forms are available online (see the “Useful Links” section below).
What is a “TD1-WS” or “Worksheet for the Personal Tax Credits Return”?
A “TD1-WS” is a worksheet that can be downloaded alongside a TD1. Like individual TD1s, TD1-WSs apply to specific years. You can find TD1-WS worksheets on the relevant pages of the Canada.ca website.
TD1 worksheets are designed to help employees calculate tax credits that are dependent on earnings. Entitlements often fall if an individual earns above a certain threshold. For example, if you support your spouse, your entitlements may drop based on their income. In these cases, the relevant TD1-WS provides the instructions for making applicable calculations.
Threshold amounts are stipulated in the TD1. If you need to use a worksheet to determine an income-dependent credit, you will be prompted to do so.
Do all employees need to fill out a TD1?
The short answer is yes, although there are several caveats.
All employees are required to fill out at least one TD1 form. This does not mean, however, that they need to fill out a new form every year or for second or third jobs.
If an employee’s tax credits do not change, an employer will calculate credits based on information submitted in a previous year.
Failure to submit relevant TD1 forms within seven days of a change of circumstances that affects their tax credit entitlements can result in large fines of up to $2,500. For this reason, it is important for employees to submit all necessary TD1s in a timely manner, whether or not they have been told to do so by their organization’s management, Human Resources (HR), or Accounting department.
When should an employee fill out a new TD1 form?
If you are an employee, you should fill out a new TD1 form when you start working for an organization (if you will receive monetary compensation) or if your tax circumstances change.
Generally speaking, you will need to complete and submit a TD1 form if one of the following criteria applies:
- You have started a new job and will be paid for your work.
- Your tax entitlements change. For example, you may start caring for an infirm relative, reach retirement age, or have children.
- You move to a new “tax zone.” In these cases, you need to fill out a provincial form for the area in question (local tax credits are based on where you live, not where you work).
- You wish to instruct your employer to pay more tax on your earnings, over and above what is required. This may sound like an unusual request, but many employees opt to increase their taxation on recurring income so they do not need to pay tax on secondary earnings in the form of a lump sum when they submit their annual return to the CRA at the end of the tax year.
If you are in any doubt about whether or not you need to submit a new form, speak to your employer.
What are the responsibilities of employers in relation to TD1 forms?
Employers should provide their employees with TD1 forms. They can do this either by providing a link to the official government webpage, from which the TD1 can be downloaded and filled out, or by creating a custom form and hosting it online.
Organizations no longer need to provide their employees with paper TD1s (although forms may be filled out and submitted as paper documents).
Once an employer receives a form, it is their responsibility to store employee tax information, calculate income tax deductions, and pay the CRA. Organizations typically use digital databases to do this. Employers also need to review forms and report any potentially deceptive entries to the CRA.
How do you fill out a TD1 form?
Filling out a TD1 form is a relatively straightforward process. In addition, TD1-WS worksheets are designed to help individuals calculate income-dependent tax credits for specific years.
Information about tax credits, and the circumstances in which they can be claimed, are contained in the TD1 form itself. You simply need to enter the applicable tax credits on each line of the document, leaving those entitlements which do not apply blank (you’ll also need to specify your name and address).
You may also wish to pay additional tax throughout the year. People often choose to do this to avoid paying a lump sum of tax on secondary earnings when they submit their annual return to the CRA.
Is there a unique TD1 form for every year?
Because taxes and credits change from year to year, new TD1 forms are published for each tax year. This is true of both provincial and federal forms.
It is not necessary for employees to submit a new TD1 form every year if their tax details do not change.
Is it possible for employers to create custom TD1 forms?
Yes, employers can create their own TD1 forms as long as certain conditions are met. These requirements are stipulated on the Canada.ca website.
There are a number of benefits to using a custom form. The main issue with using the official TD1 form is that organizations must manually process submissions and enter tax details into a database, which is time-consuming.
With custom forms hosted online, this process can be automated. Once an employee submits a TD1, information is instantly sent to the relevant database, where it will be available for payroll tasks.
Where can you download a TD1 form?
You can find the official TD1 form for 2021 on the dedicated Canada.ca webpage. Check the “Useful Links” section below for provincial forms, worksheets, and other official guidance.
Alternatively, you can use one of PandaDoc’s pre-written templates to create your own custom form.
Can organizations use a service like PandaDoc to create and host TD1 forms?
Yes. A service like PandaDoc is ideal for organizations opting to use custom forms.
We provide numerous TD1 templates along with a secure online portal where employees can verify their identities and submit information. This form can be synced with a backend database, allowing for the seamless and automated transfer of employee data, completely removing the need for manual entry.
Our full library of templates is included on all PandaDoc plans. Sign up for a free trial today to see if we’re a fit for your business.
TD1 forms for 2021 (page includes links to both federal and provincial worksheets and forms)