- Reduce Tax Deductions at Source: Form T1213/TB-1016-V
- Clergy Residence Deduction: T1223
- CRD Payroll Processing Considerations (Income Tax, CPP, EI, Quebec)
Reduce Tax Deductions at Source: Form T1213/TB-1016-V
If the minister wishes the pastoral charge or ministry site to reduce their taxable income by the amount of the Clergy Residence Deduction (CRD) and thereby reduce the amount of income tax deducted at source (pay by pay), the minister will need to obtain a “letter of authority” issued by the CRA (and, for ministers who work in Quebec, the RQ). Otherwise, the minister can claim the CRD when filing their personal tax return at year-end.
To obtain a letter of authority, ministers must apply….
- federally: CRA Form T1213, Request to Reduce Tax Deductions at Source
- and, for ministers who work in Quebec: RQ Form TP-1016-V, Application for a Reduction in Source Deductions of Income Tax
The T1223 is an annual form. Completing it is mandatory. The form does not need to be submitted with the individual’s tax return but must be available if the CRA asks to see it.
The form has three parts to be completed in sequence:
- Part A by the employee
- Part B by the employer
- Part C by the employee
The employee initiates the T1223 form, the employer certifies eligibility, and the employee calculates the actual deduction amount where necessary.
- Federal: CRA Form T1223, Clergy Residence Deduction
- Quebec: RQ Form TP-76-V, Residence Deduction for a Member of the Clergy or a Religious Order
An employer is responsible for withholding statutory deductions from the pay of any full-time or part-time employee. When deductions are withheld, they must be remitted to Canada Revenue Agency according to schedule, and a T4 slip must be issued at year-end. Copies of all T4 slips issued for a tax year and a T4 Summary form must be filed by the end of February.
Claiming a Clergy Residence Deduction reduces an individual’s total taxable income and, accordingly, the amount an individual must deduct for CPP. The CRD will reduce CPP contributions only to the extent it reduces CPP Pensionable Earnings below the Year’s Maximum Pensionable Earnings (YMPE).
Therefore, if you have a part-time employee or someone relatively low in pay grade, it makes sense to find out what the CRD will be and factor it into your payroll deductions. Otherwise, you will potentially remit more CPP premiums than required.
For an employee, any overcontribution of CPP premiums is refunded at tax time. However, for an employer, a much more convoluted application process applies and is well worth avoiding.
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