ARCHIVED CD 2002-020: Information Notice to Employees

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Reducing Source Deductions of Income Tax (Revised September 9, 2002)

The purpose of this notice is to provide you with information regarding requests for reduced source deductions of income tax.

Under certain circumstances, you may be subject to excessive income tax deductions at source. This situation could occur if you are able to claim tax exemptions or credits when you file your income tax return where these exemptions and credits are not taken into consideration in the calculation of income tax at source. If you are in this situation, you may wish to request a reduction in the amount of income tax deducted at source.

The Canada Customs and Revenue Agency (CCRA) and the Ministère du Revenu du Québec (MRQ) will consider your request on the basis of the additional tax exemptions or the additional tax credits for which you may be entitled.

An additional exemption is based on the deductions that you are entitled to claim in the calculation of your net or taxable income. In this instance, the reduction is based on a decrease in the amount of remuneration subject to source deductions. Some examples include, but are not limited to, contributions to a Registered Retirement Savings Plan (RRSP), losses related to a business, alimony payments and child support payments.

An additional credit is based on the non-refundable tax credits that you are entitled to claim. In this instance, the reduction is based on a decrease in the amount of income tax payable. Some examples include, but are not limited to, charitable donations, gifts to a government, medical expenses, tuition and examination fees.

Reducing Federal Income Tax Deducted at Source

If you are interested in having reduced source deductions of Federal income tax, then you will need a letter of authority issued by the CCRA. To obtain a letter of authority, you must submit a written request, or send a completed CCRA form T1213, Request to Reduce Tax Deductions At Source for Year(s) ______, to the Client Services Division of a Tax Services Office. You should include documents that support your request as to why less tax should be deducted. For example, if you regularly contribute to an RRSP in the year, then you should provide documents showing the amounts you contributed.

The T1213 form is available online at the following CCRA Internet address: T1213

You may also visit or contact your local CCRA Tax Services Office to obtain the form or additional information. The addresses and phone numbers for the CCRA Tax Services Offices are available at the following Internet address: Tax services offices and tax centres - Addresses, office hours, and fax numbers

Reducing Quebec Income Tax Deducted at Source

If you both work and reside in the Province of Quebec, then you will need a letter of authority issued by the MRQ in order to reduce your source deductions of Quebec income tax. To obtain a letter of authority issued by the MRQ, you will need to submit a completed form TP-1016-V, Application for a Reduction in Source Deductions of Income Tax, to an office of the MRQ.

The TP-1016-V form is available online at the following MRQ Internet address: Revenu Québec

You may also visit or contact your local MRQ Tax Services Office for the form or additional information. The addresses and phone numbers for MRQ Tax Services Offices are available at the following Internet address: Revenu Québec

Letters of Authority

Once you have submitted your request to the CCRA (and the MRQ for employees who both work and reside in Quebec), your application will be processed and you will be notified of the decision(s) by mail. You should allow four to eight weeks for your request to be processed.

If your request is refused, you will receive a refusal letter detailing the reasons why the request was denied. If your request is approved, you will be issued a letter of authority. This letter of authority will stipulate a specific amount on which income tax can be reduced. The letter of authority will be valid for the current calendar year only, unless stated otherwise. Once the CCRA (and the MRQ) has authorized a reduced amount of income tax to be withheld at source, you should provide your compensation advisor with the letter(s) of authority.

Your compensation advisor will not initiate a reduction of income tax at source before a letter of authority is received. If a letter of authority is received after the payment has already been issued to you, the payment will not be cancelled, reversed or reissued for the specific purpose of refunding the income tax withheld from that payment.

Please note that you are required to provide your compensation advisor with a new letter of authority for each taxation year.

| An income tax exemption is available for alimony payments that are required to be deducted at source pursuant to a court order dated on or after May 1, 1997. You will need to provide your compensation advisor with a letter of authority issued by the CCRA to receive a federal tax exemption on these payments. If you both work and reside in Quebec, you will also need to submit a completed form TP-1015.3, Source Deductions Return (refer to line 14), to your compensation advisor in order to receive a Quebec income tax exemption on these payments. This form is available on-line at TP-1015.3 or through an office of the MRQ.

Any request for information regarding the foregoing should be addressed to your compensation advisor.