Canadian Payroll Reporter - sample

3 Canadian HR Reporter, a Thomson Reuters business 2018 News CPR | October 2018 Distinguishing W-2s from W-4s Federal payroll rules in Canada, U.S., have similarities, but also diff erences BY SHEILA BRAWN BUSINESS globalization is quickly connecting countries around the world. For payroll professionals in Canada who oversee their employer's interna- tional payroll, it can be a daunt- ing task, with new and unfamil- iar laws, rules, and terminology. The following highlights some of the key federal payroll re- quirements in the United States, using information from the In- ternal Revenue Service (IRS) and Thomson Reuters' Canadian Payroll Manual. Social security number (SSN): An SSN is similar to a so- cial insurance number. Individu- als in the U.S. need it to work, col- lect social security benefits, and obtain some other government services. Employers must record each new employee's name and SSN from the employee's social security card and keep it in their payroll records. Employers use the number when reporting em- ployee earnings and deductions on year-end reporting forms. W-4, Employee's Withhold- ing Allowance Certificate: This form is similar to a TD1. Each new employee must com- plete one. Employees should also fill out a new form whenever their personal or financial cir- cumstances change. Employers use the information to calculate federal income tax deductions. On the W-4, employees state whether they are married or single and show the number of withholding allowances — such as tax credits for children or de- pendants — that they are claim- ing. If an employee does not pro- vide a W-4, the employer should deduct income tax as though the employee is single, with no with- holding allowances. Federal Income Tax With- holding (FITW): Employers must generally deduct federal income tax each pay period from all compensation they pay to employees. The IRS allows for a number of different income tax deduction calculation methods, with wage-bracket and percent- age methods being most com- mon, although it also provides tax deduction formulas for auto- mated payroll systems. The wage-bracket method is similar to the Canada Revenue Agency's (CRA) payroll deduc- tions tables, though the IRS not only divides its tables by pay pe- riod type, but also by employee relationship status. Each table consists of wage ranges and col- umns for the number of with- holding allowances claimed. The percentage method consists of an allowance chart and eight tax calculation tables (based on pay period). Employ- ers use the chart to determine the total value of the employ- ee's withholding allowances for the pay period. They then subtract that amount from the employee's pay period wages to determine the amount subject to income tax deductions. Employ- ers then use the tax calculation tables to determine the amount of income tax to deduct. There are different tax calcu- lation rules for special payments, such as bonuses, commissions, and overtime pay, if the employ- er identifies them as separate from regular wages. Federal Insurance Contri- butions Act (FICA): FICA is made up of both a social security (old age, survivors, and disability see U.S. page 8 IT PAYS TO KNOW Professional Development Enroll Now for the Smoothest Year-end Ever! With more than 200 federal and provincial regulations and changes each year, staying payroll compliant is one of the biggest challenges employers face. 2018 Year-End and New Year Requirements Offered in over 70 cities across Canada, this seminar is the most efficient and effective way to help you ensure your year-end payroll filing is accurate and compliant. With major changes to Labour and Employment Standards in Ontario and Alberta, changes to CPP, and new rates, our 2018 Year-end & New Year Requirements seminar can't be missed. Recommended as an essential part of every payroll professional's year-end process. Register online at payroll.ca/learning Can't make an in-class seminar? Registration is open for our highly-rated 2018 Year-end online seminar at payroll.ca Stay Current Stay Compliant payroll.ca Marty S., CPM - Member, Ontario Region

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