Tax/Payroll Question

[Bill Bumface]

After contracting for years I'm now an employee. I haven't paid normal people taxes in years, so I'm out of the loop.

When I recieved my offer I used this: http://www.finance.alberta.ca/calc-script/tax_calc.html


But on my companie's intranet it suggests using this: http://www.cra-arc.gc.ca/esrvc-srvce.../pdoc-eng.html

These give very different expectations of what tax I'll be paying.

Using $100,000 as an easy example for a single person and zero extra deductions, the Alberta calculator gives:

Federal: $17,704
Provincial: $8,026
Total: $25,730

The CRA PDOC gives:

Federal: $28,488.11
Provincial: $9,916.74
Total: $38,404.85

What gives? I have a feeling I'm going to be super dissapointed when I actually get a pay cheque....

[Dan02]

My calculator puts it at 25,730 just like the alberta one. add in CP and EI on top of that though bringing it to 28,641.

[Bill Bumface]

CPP and EI were a further ~$3000 on that calculator. It had you taking home $58,590 on $100K.

So basically if my company follows this I'm in for a giant tax return next year?

[Mccree]

When using the CRA on make you sure select how many pay periods. I think the CRA one is calculating deductions based on 100,000/pay period where the AB one uses your annual salary.

edit

if you get paid monthly then 100,000/12 = 8333.33

Total tax deductions based on 8333.33 is 2,131.70

Year tax = 2,131.70 * 12 = 25,580

[Frequitude]

Small hijack, but why do bonuses get taxed at such a high rate?

[Ryan Coke]

Originally Posted by Frequitude

Small hijack, but why do bonuses get taxed at such a high rate?

I am sure an actual accountant type can give more detail, but basically any bonuses are getting taxed at your highest marginal rate. While overall tax burden on that 100k salary is around 25%, the tax on the last dollars earned would be closer to 40%. So that bonus is more of those last dollars earned, hence the 40% hit.

There is actually no difference in the way a 'bonus' is taxed versus any other income. The same goes for overtime; it isn't actually taxed any differently, but it is all at your top marginal rate.