Employers in Canada are required to withhold income taxes, at both the federal and provincial or territorial level, from their employees. Both federal and provincial/territorial tax rates are progressive based on income. Federal rates range from 15 percent for the lowest bracket, to 33 percent for the highest earners.
For all employees aged 18 to 70, employers in Canada are also required to withhold Canada Pension Plan (CPP), contributions and Employment Insurance (EI) premiums. While those operating in Québec contribute to the Québec Pension Plan (QPP). Those contributions are deducted from wages, salaries, bonuses, and commissions.
Pay as You Earn (PAYE) tax and other withholdings calculated by the software
Earnings taxed in Canada are entered in Voyant under Income > Employment income. These earnings must be entered in gross annual amounts. The software will then automatically calculate and withhold the following from gross earnings.
- Federal income tax,
- Provincial, Territorial income tax,
- Canada Pension Plan (CPP) or Québec Pension Plan (QPP) contributions, depending on province or territory of residence,
- Employment Insurance (EI).
Standard withholdings not currently modeled in the software:
- Québec Parental Insurance Plan (QPIP)
AdviserGo accounts for these withholdings automatically
There is no need to enter taxes and other withholdings as expenses or to deduct these amounts from earnings. Earnings should be entered in the software in gross amounts, under Employment,
Note on Earnings from Outside of Canada – All earnings entered on the Employment screen in AdviserGo are assumed to be subject to Canadian federal and provincial, territorial taxes. If you earn income outside of Canada, enter it instead on the Income > Other Income screen as a non-taxable (i.e. net of taxes) “other” income.
Where can these withholdings be viewed in the software?
To view taxes and other withholdings, with your client's case open in AdviserGo, select either the Dashboard or Let's See screen. These details can also be accessed from any Insight that features the charts.
Either toggle on the Year View button, top-right of the charts, or double-click any bar of the chart. If you are on a touchscreen device, you can also long press any bar of the charts to access the year view.
This year view presents all of the annual transactional details and balances underlying the charts.
To view the annual details for a particular year of the plan, use either the slider beneath the chart or click on the appropriate bar/year of the interactive chart. If you accessed the year view by clicking or pressing a bar of the chart, details for the year (bar) that you selected will be displayed initially.
Annual withholdings will be shown on the Expenses tab.
The Taxes tab also provides an annual tax calculation worksheet, information on tax rates and brackets, and cumulative tax totals over the history of the plan.
Do tax withholdings increase in future years of the plan?
The federal tax brackets usually are escalated in future years, whereas the federal tax rates do not escalate.
Most, but not all, provincial and territorial tax brackets are also escalated in future years. Alberta, Nova Scotia, and Prince Edward Island are exceptions. The tax brackets for these three provinces are not indexed to grow into the future. Provincial tax rates are not escalated.
Future withholdings for CPP, QPP and EI are escalated.
The Default Tax Table Assumption is a preference, which is set by your firm or enterprise to apply an across-the-board annual escalation to many of the assumptions relating to taxes, as well as contribution allowances.
We code for what we know. As a rule, Voyant software is coded to account for legislated rules and only escalates tax-related assumptions once we move beyond the known. The Default Tax Table, which is found in the Plan Settings, is used to set this future escalation of values once we move beyond the known.