Tables on Diskette (TOD): More Useful Than You May Know
By Joseph McNamara, for the Canadian Payroll Association (CPA), originally published in Dialogue, the official publication for members of the Canadian Payroll Association, November/December 2004
As many payroll practitioners are already aware of, the Canada Revenue Agency (CRA) has a payroll software program called TOD (Tables on Diskette). This program, which may be downloaded free of charge from the CRA's Web site, has many useful features which many employers may not be aware of.
The program has been in existence for approximately 10 years and was primarily designed to facilitate an employer's need to calculate a net pay electronically without having to reference the applicable provincial or territorial paper T4032 Payroll Deduction Tables. The exception to this facility would be the applicable calculations for Quebec Provincial Tax, which are administered by Revenue Quebec (MRQ). Revenue Quebec uses their own tax tables, the TP-1015.TI-V Source Deduction Table - Quebec Income Tax. Revenue Quebec also has a program that is similar to TOD called WINRAS. For the purpose of this article we will focus on the features that are made available in TOD, however for the reader's convenience a link to the Quebec tables as well as WINRAS is made available at the end of this article.
Since its original inception, TOD has been enhanced in many ways and has since added new features pertinent to the calculation of a net pay, such as the bonus, retroactive payment and TD1X commission methods of taxation.
In addition to the various forms of net pay calculations, TOD currently performs other important functions, such as calculating automobile benefits as well as the validation of Social Insurance and Business Numbers.
This article will illustrate how to maximize the usage of the TOD software. Let us begin by addressing the most common usages for the program, which are the various methods that are used in order to establish an employee's net pay.
Regular pay
As was previously mentioned, many practitioners are familiar with the routine for the calculation of regular pay using the TOD. It is necessary to establish the province of employment, pay frequency and cash and non-cash related earnings, benefits and allowances. Also, the TOD routine provides for the inclusion of items that allow for tax reduction at source that can be reflected in the tax calculation. The TOD routine systematically walks users through the steps to determine the statutory withholdings for a regular salary.
In addition, there are fields where you may insert the Canada Pension Plan (CPP) and Employment Insurance (EI) year-to-date amounts or exemptions, additional tax amounts to be deducted, as well as areas where you select the applicable federal and provincial tax exemptions. Much of this functionality is very relevant to the day-to-day processing at organizations.
The tax deductions found within the TOD's regular pay feature currently mirror the calculations that can be found in the paper versions of the provincial and/or territorial T4032 Payroll Deduction Tables. Therefore, as a result, employers will often notice slight variances between their payroll system and the TOD calculation for a regular pay. This is due to the fact that the federal/provincial income tax calculations that are found in the TOD tables establish the tax amounts within the ranges specified in the tables. The payroll systems used by service providers incorporate the applicable formulas found In the T4127 Payroll Deductions Formulas for Computer Programs on the specific amounts being paid to the employee. As a result, the income tax deductions used in these programs is a better reflection of what the employee's tax deduction should be.
Even though the tax calculations do vary somewhat, the program is easy to use and can prove to be useful not only for manual payrolls but whenever an employer is required to produce a manual cheque in the event that there is an error or omission made when the regular pay is processed, or when off-cycle payrolls are run for items like bonuses or retroactive payments.
Bonus taxation method
Employers will often pay additional employment income to employees outside of their normal payroll frequency as has been previously detailed. These payments may include amounts for bonuses, commissions, banked overtime or anything else that is paid to an employee that falls outside of their normal pay frequency. For all of these payments the bonus method of taxation should be used. TOD also facilitates the bonus method calculation on a separate screen.
The bonus taxing area of the software also performs the regular pay calculation at the same time and includes all of the above-mentioned features that are found in the regular pay screen, as well as additional fields where the current bonus being paid, and the total of the bonus previously paid in the year, can be recorded.
The source deductions for both the regular pay as well as the applicable bonus will appear onscreen. As with the regular pay you can print the screen itself as well as the applicable tax tables.
One important thing to make note of is that the formula method as illustrated in the T4127 guide is used to calculate the income tax on the bonus. As a result, the tax amounts that are attributed with the TOD are more exact than the result one would arrive at when using the manual bonus taxing method. The taxes on the regular pay portion still reflect the applicable amounts found in the paper tax tables previously mentioned.
Taxation of retroactive pay
The calculation for retroactive pay is also featured in the TOD. As with the bonus calculation screen, the retroactive pay screen incorporates all of the features which can be found in the bonus pay screen. The only variances are with the retroactive pay because you have a field for the total amount of the retroactive pay and another field for the number of pay periods the retroactive pay represents.
When you click on “View Deductions” you will notice the screen is set up in the same manner as the bonus taxing screen. The top portion of the screen illustrates the regular pay along with the applicable source deductions, and the bottom portion displays the retro pay and all the particulars that apply to it.
As with the bonus calculation the retroactive pay calculation uses the formula method illustrated in the T4127 Guide. The regular pay uses the table method illustrated in the T4032 Guide. As always, the user can print the screen as well as the applicable tax table.
TD1X taxing (commission method)
The commission tax routine within the TOD is used when salespeople pay their own business related expenses. By providing their estimated annual income and expenses in the applicable fields, the system will assign the appropriate rate of federal/provincial income tax to deduct based on the estimates provided for both income and expenses.
In addition to the estimated annual income there are areas where the amount being paid is inputted along with number of days since the last payment. The number of days since the last payment assists the employer in determining the appropriate CPP deduction mostly due to the irregular nature of the payments themselves.
The ability to deduct additional source deductions as well as enter the applicable CPP and EI year-to-date amounts are also available for use in this area, as it is with the other tax calculation methods as well as the ability to print screens.
Unlike the other tax calculation methods, there are no corresponding tax tables that can be printed.
Automobile benefit calculations
The current and useful automobile taxable benefit calculation feature takes away the need for the employer to perform the manual calculations that are normally associated with calculating this taxable benefit. Once you have gathered all of the applicable information that related to the automobile benefit you enter it in the applicable fields.
The information that will be required will include various combinations of the following information as necessary:
§ The total purchase price of the vehicle including all applicable taxes (PST and GST or HST);
§ The monthly lease cost, including all applicable taxes (PST and GST or HST) but excluding insurance;
§ Whether or not the employee driving the vehicle is involved in the sale or lease of automobiles and, if so, the greater of the average cost of all automobiles acquired or all new automobiles (including applicable taxes);
§ Whether or not the employee reimbursed 100% of operating expenses attributable to the personal use of the vehicle no later than 45 days after the end of the year;
§ Whether or not the employee has filed an election to use the alternative method of calculating the operating cost benefit (one-half of the standby charge);
§ The total of all kilometers driven as well as the portion of the total kilometers that relate to business and personal usage;
§ The number of days available in the year; and
§ Any amounts reimbursed by the employee within 45 days after the end of the year.
Once all the pertinent data has been entered the “View Results” icon will produce the total annual cost of the automobile benefit. The pro-rated per pay amount that results from performing this calculation can be used as an estimate for the following year.
Although the automobile benefit calculation currently exists in the 2003 and 2004 version of the TOD, the CRA will be removing this feature from future versions of the software beginning with the January 2005 edition. Employers will now be able to perform the automobile calculation interactively and directly from the CRA's Web site without having to download the program. There is a potential that the entire TOD program will eventually be a totally interactive tool on the CRA Web site.
Other features
TOD also has other helpful easy to use features designed to make things easier and less time consuming for employers:
§ The software will also validate Social Insurance Numbers (SIN) as well as Business Numbers (BN). Simply click on the Options menu and select BN or SIN and enter the number you wish to validate. The software will confirm immediately whether or not the number is valid; and
§ A helpful index is also available in the Help menu that includes additional information about many of the features previously discussed.
Helpful links
The following helpful links will provide you with additional information relevant to what has been previously addressed in the TOD article:
TOD (Tables on Diskette)
http://www.cra-arc.gc.ca/tax/business/tod/menu-e.html
T4032 payroll deduction tables
http://www.cra-arc.gc.ca/tax/business/topics/payroll/t4032jan04/menu-e.html
T4127, payroll deductions formulas for computer programs (MC)
http://www.cra-arc.gc.ca/tax/business/topics/payroll/formulas-e.html
TP-1015.TI-V source deduction table - Quebec income tax
(Revenue Quebec paper tax tables)
http://www.revenu.gouv.qc.ca/eng/formulaires/tp/tp-1015_ti-v.asp
WINRAS - calculation of source deductions and employer contributions
(Revenue Quebec equivalent to TOD)
WinRAS - Calculation of source deductions and employer contributions