Vacation Pay Deducted Tax in BC

[MoneyGal]

BUt you can set the amount of withholding to whatever you think is adequate based on your total expected income. IOW at less than rates for salary would indicate to compensate for special situations. As long as the amounts are adequate to get you close enough to the actual amount owing, there is no penalty.

(I had the opposite problem where I set it above the required amounts to compensate for commission income that put me into a higher tax bracket, to avoid penalties.)

Yes, but probably not for vacation pay. You use the TD1 to adjust (for things listed on the TD1) and the T1213 (if I am remembering the sequence of numbers right on that form) -- but none of the available options is "vacation pay." You can get a letter of authorization from an employer or from CRA to adjust withholdings, but you can't (by default) know the amount of unpaid vacation pay which you will claim at some future unspecified date, so there's no way to adjust the withholdings *for vacation pay specifically* in advance.

[sprocket1200]

There are lots of ways to not give the govt their free loan.

[Homerhomer]

There are lots of ways to not give the govt their free loan.

Please list them for the benefit of all of us.
Thank you.

[kcowan]

... so there's no way to adjust the withholdings *for vacation pay specifically* in advance.

True. But my commission earned a % bonus in lieue of vacation which I included in my earnings estimate. It was paid out the following year but once rolling, it came in every year in March.

(While it needed approval from the employer, they would allow me to account for planned RRSP contributions too.)

[MoneyGal]

The other issue is that CRA is always happy to go the other way -- to get you to allow them to deduct *more* tax than you'd otherwise pay (and in fact they impose this on you by way of quarterly installments once you have tax owing above a certain limit). The OP was asking about how to get CRA to adjust withholdings downward.

[kcowan]

CRA wanted me to pay way too much in quarterly installments in 2011 because I had cancelled two life insurance policies in 2010 and took an extra $70k into income. I said no thanks I will pay what I think I owe. It all worked out fine.

[MoneyGal]

Uh, yes; I know. You will pay penalties on unpaid tax that would otherwise be owing if they have supplied you with a quarterly installment schedule and you didn't meet it AND you owe tax.

NEways. The original question was "how can I get around the withholding amount on this vacation pay?" Despite assertions that it is possible, I am saying it isn't.

I understand you can adjust your "regular" paycheque withholdings and you can also comply or not with a quarterly installments request.

But in the specific situation the OP asked about, I am not aware that it is possible to *in advance* adjust the "standard" withholding rate on unpaid vacation which is being paid out on that cheque.

Possibly you could do it if you knew far in advance you'd be leaving and the amount of vacation pay you'd be receiving by way of a letter to CRA from your employer, but you'd need to allow processing time (potentially multiple months) and I'm not sure why your employer would do it (or that CRA would agree).

[sprocket1200]

They asked us to pay quarterly as well. I laughed.