Calculating Annual Taxable Income Using the Annualized Tax Method

For the regular annualized tax method, the calculated Pay Period Taxable Gross is multiplied by the number of pay periods in the year.

When you use Payline One-time Deductions to enter before-tax deductions for Plan Type 8x (Pension Plans) and Plan Type 4x (Savings Plans) using the Override feature, the system excludes these entries when determining Pay Period Taxable Gross, but reduces Annual Taxable Gross on a one-time basis.

Example: Annualized Tax Calculation

Annualized Tax Calculation (Bi-weekly payroll – 26 pay periods), derive annual taxable gross:

• Regular pay period taxable earnings = 2,500.00 CAD

• Pay period taxable benefits = 75.00 CAD

• Pay period before-tax deductions (these are before-tax deductions the employee is enrolled in) = 200.00 CAD

• Pay Period Taxable Earnings = 2,375.00 CAD

• Annual Taxable Income = $2,375.00 x 26 pay periods = 61,750.00 CAD

• Payline One-time Deductions (before-tax, Plan Type 4x) = 1,500.00 CAD

• Adjusted Annual Taxable Income = 60,250.00 CAD

The annualized tax calculation uses $60,250.00 to derive the pay period income taxes.

Note:

If one of the pay period before-tax deductions is to be entered as a one-time deduction on Payline One-time Deductions, use the Override feature for the amount to be inclusive of the pay period deduction. If you use Addition instead of Override, the total amount reduces the Pay Period Taxable Income.