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CAPAY: Canada RRSP How to Handle

edited Feb 28, 2014 12:00PM in Payroll and OTL - EBS (MOSC) 1 commentAnswered

Canadian law allows employees to send bonus dollars directly to a financial institution to defer federal and provincial tax.

The RRSP deduction only defers federal and provincial tax, so other required deductions must be taken (ie. CPP/QPP, EI, Investment Plan, Pension, garnishment, etc.)

This process is currently handled manually.  Today, the Canadian government will notify an individual how much they can deposit to the RRSP.  For example $1000.  The employee can ask the employer to take part of their bonus and send it to the xyz financial institution.  Let’s assume the bonus is $5000 total.  The employer would deduction pension, investment plan, CPP/QPP, EI, etc, but NOT federal or provincial tax.  Let’s say that leaves $2500.  The employer would cut a $1000 check to the xyz financial institution and $1500 to the employee. 

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