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It is my first time to recive yearly bonus and it came to my knowledge that 46% of it will be deducted as tax. and no tax return will be issued.
is this true?

Thanks a lot
 

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It is my first time to recive yearly bonus and it came to my knowledge that 46% of it will be deducted as tax. and no tax return will be issued.
is this true?
Whether it is true, I have no idea. But it is usual for the employer to withhold a portion of any employment income as income tax deducted at source. This will be reflected in your T4 which will show the total income you earned and the total amount of taxes deducted at source. Whether you get any back from Her Majesty after you file your tax return would depend on a lot of factors, but for most people with only employment income the amount deducted at source is more than enough to cover taxes and they get some back.
 

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CPP and EI should also be deducted. Is that included in the 46%? My bonus always had income tax, CPP and EI deducted. As noted above, the tax deducted at source will be reconciled when you do your income tax return. CPP and EI deductions will mean you will reach the maximum contribution earlier in the year, assuming your income level will put you at max contribution for both items.
 

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It is my first time to receive yearly bonus and it came to my knowledge that 46% of it will be deducted as tax. and no tax return will be issued.

is this true?
Yes and No.

I haven't received a yearly bonus in a while but for the overtime worked, it's pretty much been the same situation. As others have noted, more than just income tax is deducted.

My understanding is that the employer has to withhold taxes as if one was paid that amount, for every pay cheque, through the year. This means the tax is over-stated.

It's why my co-workers talk about "I'm losing 50% so why bother working overtime?".


The part that is not true for almost everyone is the "no tax return", which I think you really mean "no tax refunded".

When one files one's annual tax return for the tax year the bonus was paid in, this larger tax based on the bonus will be reported. All other sources of income, taxes withheld as well as other deductions from income and credits will be factored in. The total taxes paid will be compared to the taxes from taxable income. If more was paid than owed, there will be a refund.

Basically, for there to be no tax refund from the bonus, one would need to be other sources of income that don't have taxes withheld from them (ex. investment income) that are equal to or exceed the bonus amount.


Add in that most people make RRSP contributions (reduce taxable income) and charitable donations so that most people have an even bigger tax refund. These mean that likely even the withholding taxes on regular income with no bonus is too large, generating a refund.


Cheers
 
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