*A personal tax rate change applicable to employees earning $150,000 or more became effective September 1, 2014, retroactive to January 1, 2014. Please see the following excerpt from the CRA website http://www.cra-arc.gc.ca/tx/bsnss/tpcs/pyrll/t4127/ .
“The September 1, 2014, version of Guide T4127, Payroll Deductions Formulas for Computer Programs, contains adjustments for increases to personal income tax rates which were tabled in the Ontario budget on July 14, 2014, and passed into law on July 24, 2014. The changes are retroactive to January 1, 2014, and the revised tables reflect prorated tax rates to allow employers to withhold the correct additional amounts from affected employees between September and the final pay of 2014. The changes to the tables apply to employees who earn more than $150,000 in 2014.
The CRA normally requires employers to withhold and remit income taxes in line with current rates, but because of the complexities and timing of the Ontario budget measures it is recognized that these income tax changes will be implemented on a best-effort basis where practical, in full appreciation of the different payroll systems and administrative capacities of employers. Employers will not face penalties for failing to withhold as a result of the Ontario budget measures passed on July 24, 2014.
Employees whose employers are unable to change their payroll systems or processes on time can ask their employers to increase withholdings from September to December 2014. This could reduce the amount the employees owe when they file their 2014 income tax and benefit return.
Employers are encouraged to discuss these changes with affected employees”
Although the CRA is only requiring employers to make their “best-effort” to comply with this tax rate increase in 2014, Microsoft released an August update for the Dynamics GP Canadian Payroll solution to incorporate the rate change. The application of this update will be relatively simple for clients on the following versions of GP:
GP 2010 version 11.0.2320 with CanPay version 11.0.2322
GP 2013 version 12.0.1745 with CanPay version 12.0.1701 (“GP 2013 R2”)
You can check your version by choosing the blue question mark or the Help menu from within GP and then going to “About Microsoft Dynamics GP”
If you are not on one of the above noted versions of GP, the payroll tax update is slightly more extensive. If you are not already on the R2 release of GP 2013, then to apply the tax update we must first apply the R2 update to your site. Applying the R2 update is a process similar to an upgrade to a new version of Dynamics GP. Clients who choose to not update to R2 now will have to do so later this year anyway, prior to or concurrent with the year-end tax update
Please note – Microsoft has determined that application of R2 and/or the August Canadian Payroll tax update causes an issue relating to the accurate distribution of Ontario Employer Health Tax (“EHT”) between departments. Microsoft plans to resolve this issue with the 2014 year-end tax update. If your organization relies on the distribution of EHT between departments, you may want to consider deferring the August tax update and waiting for the year-end tax update to be released.
For those clients that prefer to wait for the year-end tax update, there are two proposed methods of adjusting payroll tax for the $150,000 tax rate change:
Manually adjust the income tax deductions for employees earning over $150,000.
Re-configure the TD1 values by adding an amount to the “Additional Tax Deducted” field.
We understand this is not a straightforward tax update decision and have tried to provide as much detail as possible to assist you in understanding your options as a Canadian Payroll client. Each client situation is different, so we encourage you to contact us to review the specifics regarding your installation.
Before contacting us, please reply to this email with the following information:
Screenshot of “Help>About This Window” in GP.
Preferred dates for the update (please allow one day of downtime when selecting a date).
Identify whether the EHT distribution issue is relevant to your installation of GP
We also encourage our clients to start planning for the Year End Update now by providing Rimrock with the following information:
Payroll Cycle (Weekly, Bi-Weekly…)
Last pay date in 2014 prior to January 1, 2015
First pay date on or after January 1, 2015
Two preferred dates on which you would like the tax update performed by Rimrock
The GP version currently in use at your organization. Please note the complete version code is required (e.g. 12.00.1482). To obtain the version code, please follow: from Help>About Microsoft Dynamics GP and provide a screenshot of this window
Number of workstations on which GP is installed
If you have any questions about the tax update, please email taxupdates@rimrock.com or contact us here.