# Vacation Pay Deducted Tax in BC



## Dragon000 (Sep 3, 2011)

i've been employed for just more than a year and I just left my position, during the year I haven't taken any vacation
so i get my last cheque that has both the vacation pay (in total from day 1) and my last pay period
however, the combined deducted tax is around 19%!! is this right?
when i used a tax calculator it shows the same thing...but are they suppose to deduct the taxes separately? or does it matter?
because when i use the calculator for each of them individually, there's only a tax deductible of 11%-12% for each
i've read on the canadian government website that says if i haven't taken vacation and left the company, the vacation pay would be treated as a bonus but tax deductible is 15%.....so 19% seems awfully high
btw, my wages are at the low end section...i.e. less than $25000 a year
i get paid bi-weekly


----------



## OptsyEagle (Nov 29, 2009)

Can't say if it is right or wrong but I can tell you that it is only withholding tax. If they took too much you will get it back when you file your tax return and if they didn't take enough you will owe some. In 6 months you will know and it will all be reconciliated.


----------



## andrewf (Mar 1, 2010)

Don't worry. Each pay period, your taxes are withheld assuming you earned money at that rate over the whole year. Because your income for that pay period was higher than usual, it assumes your annual income is higher and withholds the appropriate amount. You will receive the difference as a tax refund when you file your taxes.

I have the same issue when I get my bonus each year. Usually I end up being bumped up to the highest tax bracket for that week, and I get to wait ~14 or so months to get that money back from the government, as it is paid out in March.


----------



## sprocket1200 (Aug 21, 2009)

thank you guys for leaving your tax money with the feds for so long!


----------



## andrewf (Mar 1, 2010)

I have little choice. I am only allowed to contribute it to a group RRSP with a bank I don't want to do business with.


----------



## sprocket1200 (Aug 21, 2009)

nope, you can avoid it, but i thank you for giving in!


----------



## andrewf (Mar 1, 2010)

Nope, I can't. I have investigated my options. If you think otherwise, say how. 

Cheers.


----------



## sprocket1200 (Aug 21, 2009)

I believe it is called a td1 form. You can ask for less withholding.


----------



## MoneyGal (Apr 24, 2009)

Sprocket. The TD1 form (here: http://www.cra-arc.gc.ca/formspubs/frms/td1-eng.html) allows you to adjust the withholding on *regular* paycheques. In the situation the OP described (unpaid vacation), there is no form to fill out with CRA to adjust the withholding amount. If you click through on my link and review the types of withholding adjustments that you can enter on the TD1 form, you will see this is so.


----------



## kcowan (Jul 1, 2010)

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.)


----------



## MoneyGal (Apr 24, 2009)

kcowan said:


> 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 (Aug 21, 2009)

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


----------



## Homerhomer (Oct 18, 2010)

sprocket1200 said:


> 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 (Jul 1, 2010)

MoneyGal said:


> ... 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 (Apr 24, 2009)

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 (Jul 1, 2010)

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 (Apr 24, 2009)

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 (Aug 21, 2009)

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


----------

