Wondering Why You Are Getting Different Taxes on Every Paycheck?
Different Taxes on Every Paycheck?
In Canada taxes are annualized meaning they are once a year, before I explain; you need to understand the following equations;
- Annual Tax = Taxable income x pay frequency ( how many times a year do you get paid)
- Pay Period Tax Installment = Annual Tax / pay frequency
Your paycheck looks different every time due to changes to pay period, such as increase in salary, new taxable benefit values, growing or declining contributions to pension or retirement. All of these factors will change the annualized calculations, this will then reveal in your paycheck. Thus, if you’re net taxable income remains the same for the entire year, then same amount of tax will be withheld each paycheck, however; this is not the case for most of us. In addition; tax credit you are eligible for may change if you update your TD1 form (Personal Tax Credits Return) or have a status change (single-married) and become exempt from CPP contributions or EI premiums.