How to Fill Out Your TD1 Form
Not sure how to fill out your TD1 form as an employee? This article is your step-by-step guide to filling out your Federal TD1 form in Canada. This guide will also help employers understand how TD1 forms work.
This form is crucial as it helps your employer determine the correct amount of income tax to deduct from your paycheck.
Read on below or check out this video if you'd rather have Joe explain it to you 👇
What is a TD1 Form?
The TD1 form serves a specific purpose: it guides your employer on how much income tax to deduct from your paychecks throughout the year.
While this form is not your actual tax return, it plays an essential role in influencing your financial situation at tax time.
Here's a quick summary of what you need to know:
- Personalized to You - It considers factors like having children or being a student, affecting how much tax you pay.
- Avoids Surprises - By accurately filling it out, you ensure that the right amount of tax is taken, so you don't owe a lot or get a huge refund at tax time.
- Adaptable - If your life changes, like getting married or starting a new job, you update the TD1 form so your employer can adjust your taxes accordingly.
- Ongoing - It's not a one-time thing; keep it up to date as your life changes to keep your tax situation correct.
In simple terms, the TD1 form helps your employer take the right amount of tax from your pay, keeping everything balanced for your individual situation.
It's a key tool to get the tax part just right and avoid surprises at tax time.
How the TD1 Form Affects Your Taxes
Next, it’s important to understand how your TD1 form affects your taxes as an employee.
When you fill out a TD1 form correctly, considering all your tax credits, deductions, and individual circumstances, it helps your employer deduct the right amount of income tax from your salary.
In an ideal scenario, the amount of tax deducted should align closely with the total tax you owe for the year. Then when you file your tax return, you would neither owe much tax to the Canada Revenue Agency (CRA) nor expect a substantial refund.
However, if the TD1 form isn't filled out accurately, it can lead to larger than expected tax balances owing or unexpected refunds when you file your tax return.
An unexpected refund may seem like a good thing, but it actually means you’ve overpaid taxes to the government throughout the year.
Let’s dig into these two scenarios a little bit further to help build a better understanding of how the TD1 form affects your taxes.
Under-deduction of Taxes
Under-deduction of taxes can happen when you include more tax credits on your TD1 form than you’re eligible for.
Said another way, if you overstate your tax credit claims on the TD1 form, your employer may deduct less tax from your paychecks than you should have been paying throughout the year.
Less tax deducted throughout the year could result in a tax balance owing at tax time. This just means you would owe money to the CRA when you file your tax return.
It’s common and totally fine to have a balance owing when you file your tax return, but it can be an unpleasant surprise if you’re not expecting it.
Over-deduction of Taxes
On the other hand, over-deduction of taxes could happen if you omit some of your eligible tax credits from the TD1 form.
If you underestimate your claims for tax credits, your employer may deduct more tax from your paychecks than necessary.
In this case, you're essentially giving the government an interest-free loan throughout the year, because you're paying more in taxes than you should.
While you'll get this money back in the form of a tax refund, it could have been in your hands earning interest or helping manage your cash flow during the year.
So, ensuring that the TD1 form is filled out accurately to your actual circumstances is critical to avoid both under-deduction and over-deduction of taxes. This way, the amount of tax withheld from your paychecks should align closely with your actual tax liability for the year.
Ok, now that we have the concept down, let’s look at exactly how to fill out this thing.
How to Fill Out Your Federal TD1 Form
You might find your eyes glaze over when you first look at your TD1 form. Don’t worry, it’s not that painful and we’re going to take it one step at a time.
There are also Provincial and Territorial TD1 forms that work in a very similar way. This article will also give you the understanding needed to fill out your applicable Provincial or Territorial TD1 as well.
Fill in Your Personal Information
Start with the easy part: your last name, first name, birth date, address including postal code, and social insurance number.
Line 1 – Basic Personal Amount
On the first line, you will enter your basic personal amount. Unless your income is over $165,430 during 2023, you would enter a basic personal amount of $15,000 on line 1.
For those making more than $165,430, there's a worksheet called the “TD1-WS” that will help you determine the correct amount to enter into line 1.
The worksheet will determine your basic personal amount somewhere between $15,000 and $13,521.
As your income goes beyond $165,430, the calculated amount decreases from $15,000.
For example, if your income is $180,000, the calculation would look like this 👇 and you would claim $14,689.41 on line 1.
Once your income level is beyond $235,675, the sliding scale stops and your Basic Personal Amount is capped at $13,521.
For example, if your income was $236,000, the calculation would show a negative amount on line 5 of the worksheet.
Once the result of line 5’s calculation is 0 or negative, you just use the base $13,521 as your Basic Personal Amount.
Line 2 – Canada Caregiver Amount for Infirm Children Under 18
Line two is for those who have a child who is infirm and under the age of 18.
Here, you'll enter $2,499 per infirm child.
You can find more information on Canada Caregiver amount eligibility here👈.
Line 3 – Age Amount
Line 3 is for those 65 years of age or older. The amount you can claim depends on your income. If your income is under $42,235, you'll get the full amount of $8,396.
If your income falls between $42,235 and $98,309, you can claim a prorated amount. If your income is over $98,309, you won't be able to make a claim.
You would use the “TD1-WS” form again to calculate a prorated amount.
For example, if your income is $50,000, your prorated age amount would be $7,246.25 , which is calculated as:
But when your income gets closer to $98,309, the age amount goes away completely. This example shows income of $98,308 allows for an age amount of five cents.
Line 4 – Pension Income Amount
If you receive pension income (other than CPP, OAS, or the guaranteed income supplement), you can claim a $2,000 deduction on line 4.
If your pension income is $2,000 or more, you’ll enter $2,000 on this line. If your pension income is less than $2,000, enter that amount instead.
Line 5 – Tuition
Line five is for individuals who attend post-secondary school. Here, you'll enter the amount of tuition you paid. This will reduce the amount of tax that your employer will deduct.
Line 6 – Disability Amount
Line 6 is for the disability tax credit. You can only claim this if you have applied for it and the CRA has agreed that your claim is valid.
If eligible, you'll enter $9,428 here.
You can find more information on eligibility for the disability amount here👈.
Line 7 – Amount for Support of a Spouse or Common-Law Partner
On line 7, if you have a spouse or common-law partner who doesn't earn any income and lives with you, this allows you to claim up to a $15,000 credit.
The amount to enter on line 7 is calculated using your “Basic Personal Amount” that you entered on line 1 of your TD1 form.
There are two versions of the calculation:
- If your spouse is not infirm, take the amount you entered on line 1 of your TD1 form and subtract your spouse’s estimated net income for the year.
- If your spouse IS infirm, take the amount you entered on line 1 of your TD1 form, add $2,499 then subtract your spouse’s estimated net income for the year.
Having an infirm spouse means they have an impairment in physical or mental functions and will likely continue to be dependent on others for an indefinite duration.
Line 8 – Amount for an Eligible Dependant
Line 8 is for those who have a child but not a spouse, or whose spouse does not live with them.
You can claim this amount as an equivalent to spouse deduction. The amount works the same as line 7, where there are two versions of the calculation.
- If your child is not infirm, take the amount you entered on line 1 of your TD1 form and subtract your child’s estimated net income for the year.
- If your child IS infirm, take the amount you entered on line 1 of your TD1 form, add $2,499 then subtract your child’s estimated net income for the year.
Line 9 – Canada Caregiver Amount (Infirm Spouse or Dependant)
Line 9 is for those who support an infirm spouse or dependant whose income will be $26,782 or less during the year.
If this is you, then use form “TD1-WS” to calculate the amount to enter in line 9.
- Take the base amount of $26,782 (this is given in the form)
- Subtract your infirm dependant’s estimated net income for the year
- Enter the difference in line 3 up to a maximum of $7,999
- Subtract the amounts from either line 7 or line 8 (depending on which applies)
- Enter this amount on line 9 of the TD1 form, unless it’s negative. If it’s negative, enter $0.
Line 10 – Canada Caregiver Amount (Dependant Aged 18 or Older)
Line 10 is for those who support an infirm dependant who is 18 years of age or older.
If the dependent's income is $18,783 or less, enter $7,999 on this line.
If the dependent's income is between $18,783 and $26,782, use line 10 on form TD1-WS to calculate the amount.
- Take the base amount of $26,782 (this is given in the form)
- Subtract your infirm dependant’s estimated net income for the year
- Enter the difference in line 3 up to a maximum of $7,999
- Subtract any amount that will be claimed by another caregiver (if applicable)
- Enter this amount on line 10 of the TD1 form, unless it’s negative. If it’s negative, enter $0.
Line 11 Amounts Transferred from a Spouse/Common-Law Partner
Line 11 is for any amounts that are transferred from a spouse or common-law partner.
If they will have any unused age amount, pension income amount, tuition amount or disability amount, enter that on line 11.
Line 12 – Amounts Transferred from a Dependent
Line 12 is for any amounts that are transferred from a dependent.
This includes either unused disability amounts or unused tuition amounts that will be transferred to you upon filing your income tax returns.
Line 13 – Total Claim Amount
All the amounts from previous lines add up to the total claim amount on line 13.
This number determines your deductions for the year and reduces the amount of tax that your employer will withhold.
The larger the amount on line 13, the less tax your employer will deduct from each paycheck.
A lower amount on line 13 means that typically more tax will be deducted from each paycheck.
Head back up to the top of this article for a reminder on what can happen when more tax is withheld from your check vs when less tax is withheld.
TD1 Form - Page 2
On the back of the form, you'll find information on when to fill out the TD1 form and what to do if you have multiple employers.
When to Fill Out a TD1 Form
You'll need to fill out a TD1 form if any of the following situations apply to you:
- New Job or Income Source - If you have a new employer or someone who will be paying you money (called a payer), and you'll be receiving income such as salary, wages, commissions, pensions, employment insurance benefits, or any other earnings, you'll need to complete this form.
- Changes to Your Personal Information - If something has changed in your life that affects your taxes - for example, the number of dependents you have has changed, you'll need to update the TD1 form.
- Living in a Specific Zone - If you're claiming a deduction because you live in a particular area designated by the tax authorities (called a "prescribed zone"), you'll need to fill out this form.
- Want More Tax Taken Out of Your Pay - If you want your employer or payer to take out more tax from your paychecks (this might be helpful if you think you will owe extra tax at the end of the year), you'll use this form to make that request.
More Than One Employer
If you are working for multiple employers or receiving payments from multiple sources, you need to be careful with how you claim your personal tax credits on the TD1 form. You can only claim these credits once.
If you've already claimed your personal tax credits on a TD1 form for 2023 with one employer or payer, you cannot claim them again with another. In that circumstance you would:
- Check the box indicated on the form for this situation
- Enter "0" on Line 13
- Leave Lines 2 to 12 blank (do not fill them in)
This ensures that you don't double-claim the credits and helps your employers or payers deduct the correct amount of tax from your payments.
Total Income is Less Than the Total Claim Amount
If you expect that your combined income for the year from all sources (including multiple employers or payers) will be less than the total amount you can claim in credits on line 13 of the TD1 form, you should:
- Tick the Box - Tick the box on page 2 of the TD1 form that corresponds to this situation.
- Result - By doing this, you are informing your employer or payer that they should not deduct any tax from your earnings.
Essentially, this section is telling your employer or payer that, based on your estimated income and claim amount, you will not owe any income tax for the year. This means they shouldn't withhold any tax from your paychecks.
Section for Non-residents
This section is specifically for individuals who are non-residents of Canada. It’s used to determine how to handle personal tax credits based on world income.
There are two options:
- 90% or More of World Income Taxable in Canada - If 90% or more of your global income will be included in determining your taxable income in Canada for the year 2023, tick the "Yes" box and fill out the TD1 form as normal.
- Less than 90% of World Income Taxable in Canada - If less than 90% of your world income will be taxed in Canada, tick the "No" box and enter $0 on line 13.
If you're unsure of your residency status or have any questions regarding this section, you can call the international tax and non-resident inquiries line at 1-800-959-8281.
This part of the form ensures that non-residents are treated appropriately under Canadian tax law, based on the portion of their income that is subject to Canadian taxation.
Provincial or Territorial Personal Tax Credits Return
If your claim amount on line 13 of the TD1 form is more than $15,000, you'll also need to fill out a provincial or territorial TD1 form.
Your employer or payer will use both the federal and provincial or territorial TD1 forms to figure out how much tax to take off your pay.
If you're only claiming the basic personal amount, your employer or payer will deduct provincial or territorial taxes after allowing for that amount.
If you're a Saskatchewan resident with children under 18, you might also want to fill out Form TD1SK, the 2023 Saskatchewan Personal Tax Credits Return, even if you're only claiming the basic personal amount on the TD1 form.
Deduction for Living in a Prescribed Zone
If you live in certain northern regions of Canada like the Northwest Territories, Nunavut, Yukon, or other specified northern zones for more than six consecutive months, you may be eligible for a special deduction.
- You can claim $11.00 per day if you live in the specified northern zone.
- If you maintain and are the sole person claiming the dwelling in that zone, you can claim $22.00 per day.
- If you live in an area classified as an intermediate zone, you can claim 50% of the above amounts.
This deduction recognizes the unique circumstances of living in these specific areas. More information is available at Canada's tax website for northern residents.
Here’s how to fill out this section:
Determine Your Zone - Figure out if you live in a prescribed northern zone or an intermediate zone.
Calculate Your Eligible Days - Count the number of days you lived in that zone for more than six consecutive months starting or ending in the year.
- If you live in the prescribed northern zone, use $11.00 per day.
- If you live in the prescribed northern zone and are the only person in your dwelling claiming this deduction, use $22.00 per day.
- If you live in a prescribed intermediate zone, use 50% of the above amounts, so either $5.50 or $11.00 per day depending on your situation.
Multiply the Rate by the Number of Eligible Days - Multiply the appropriate rate by the number of days you lived in the zone.
Enter the Amount on the Form - Write the total dollar amount you calculated in the indicated box on page 2 of the TD1 form.
Additional Tax to Be Deducted
This section of the TD1 form provides an option for individuals to have more tax withheld from their paychecks.
If you expect to have other income in addition to your regular salary or wages, you might end up owing more tax at the end of the year. To avoid this, you can choose to have additional tax taken out of each of your regular paychecks or payments.
If you want to choose this option, simply enter the additional dollar amount that you would like to be deducted from each paycheck.
This provision offers a way to better manage tax withholding throughout the year and can reduce the likelihood of surprise tax bills when you file your return. However, It does not change the amount of tax you will eventually pay; it just changes the timing of when the tax is paid.
Reduction in Tax Deductions
The TD1 form includes a section called "Reduction in tax deductions," which allows you to have less tax taken out of your regular income if you qualify for certain tax deductions or tax credits.
This may include deductions or credits such as RRSP contributions, child care expenses, deductible employment expenses, charitable donations, or tuition and education amounts carried forward from the previous year.
If these apply to you and you would like to reduce the tax taken off each paycheck, you'll need to fill out a special form called "Request to Reduce Tax Deductions at Source." Once you fill it out and submit it, the tax office will send you a letter that says you're allowed to reduce your tax deductions.
You would then give this letter to your employer and they will take less tax out of your pay. It's like having a coupon that tells your employer you can pay less tax.
By doing this, you may end up with more money in your pocket during the year, but a reduced tax refund or increased tax balance when you file your tax return.
Completing the TD1 Form
Once you've filled out the TD1 form, make sure to sign and date it, and then give it to your employer or whoever is paying you.
You may also want to make a copy or take a photo of your completed form before giving it to your employer so you’ll have it for quick reference if needed.
Hopefully filling in your TD1 will be much easier after reading this article.
Please feel free to drop us a line if you’re a small business owner in Canada and are interested in Avalon’s payroll or accounting services.