Income tax calculations, when performed by a computer, are almost always different from the tax deduction specified in the manual tables (including Tables on Diskette provided by CRA.) See Tax Computation Method
Small differences are expected, and result from the fact that computer tax calculation is more accurate than printed tables. However, computer calculated tax on a bonus payment might differ significantly from the tax deduction specified in manual tables. To illustrate this, here is the table method for calculating a tax deduction on a one-time bonus:
Assumptions:
$1,733.00 pay per pay period
12 Pay Periods per year
Bonus of $400.00
Claim code of 1
| Tax on $1,733.00 from monthly table (1994 rates): | 299.00 |
| Divide bonus by PP ($400/12) = | 37.91 |
| Add to regular salary | +1,733.00 |
| Total: | 1,770.91 |
| Tax on $1,770.91 from monthly table: | 303.55 |
| Subtract tax on regular salary | -299.00 |
| Difference: | 4.55 |
| Multiply by pay periods (12) to get tax on bonus | 54.60 |
| Total tax deduction (299 + 54.60) | 353.60 |
We will now repeat this example and display beside it for comparison the computer calculation.
| | Table | Computer |
| Tax on regular | 299.00 | 297.22 |
| Tax on regular + 1/12th of bonus | 303.55 | 305.68 |
So far the tax calculated is very similar, but this is what happens in the rest of the calculation:
| | Table | Computer |
| Extra tax on bonus for 1 pay period | 4.55 | 8.46 |
| Multiply by 12 pay periods: | 54.60 | 101.53 |
| Add to regular tax | + 299.00 | + 297.22 |
| Total tax deduction | 353.60 | 398.75 |
| Difference: 45.15 | | |
Both methods are "correct" in that they follow the rules specified by CRA. The difference of $45.15 is a direct result the slight inaccuracies of the deduction tables compared to the more accurate computer calculation. These small differences become appreciable when multiplied by the number of pay periods.
Either amount (353.60 or 398.75) could be deducted (since both are technically correct), but the 398.75 is the more accurate of the two results. Regardless of which amount is deducted, at the end of the year when the employee files their income tax return, their total tax payable for the year will be the same. Any difference between this amount and the tax deducted will be refunded or will become payable at that time.