Draft version 3 of T4127, payroll deductions formulas for computer programs, effective Jan. 1, 2012, is now available on the Canada Revenue Agency (CRA) website.
The publication contains the formulas payroll professionals need to determine federal, provincial (except Quebec) and territorial income taxes. It also contains the formulas for Canada Pension Plan (CPP) contributions and employment insurance premium deductions.
The formulas also let payroll professionals calculate payroll deductions for special cases such as commission, pension income, bonuses and retroactive pay increases.
The formulas used in the publication to calculate statutory deductions have been approved for purposes of the Income Tax Act, Canada Pension Plan and Employment Insurance Act, as well as their related regulations and any amendments proposed to these acts. The formulas are valid unless any adjustments are needed because of changes to income tax rates, personal tax credits, or CPP pensionable earnings, contributions or rate, or EI insurable earnings, premiums or rate.
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