Starting a first career

Get taxed the right way with the TD1

Alex’s first task at his new job is completing the TD1 form. He has a vague memory of doing one at the coffee shop job, but it’s a blur. He decides to learn more about it. This is a federal and provincial document that every employee in Canada fills out when they start a new job. It helps employers calculate how much income tax to deduct from each paycheque.

Alex learns that:

• if the information he provides on the TD1 form is not accurate, his employer might deduct too much or too little tax
• claiming the basic personal amount for more than one job can result in incorrect deductions
• filling out the TD1 form accurately helps avoid surprises at tax time

What pay deductions mean for you and your future self 

After getting his first pay stub, Alex is shocked at how much smaller his take-home pay is than his gross salary. His manager walks him through the deductions and explains that this is normal.

Alex learns:

• gross pay is his total earnings before deductions
• net pay, or take-home pay, is what he actually receives after taxes and contributions
• mandatory deductions include:
  • income tax
  • employment insurance (EI) – for temporary income support during job loss, illness, or parental leave
  • Canada Pension Plan (CPP) – which contributes to retirement income

His employer also makes additional contributions to EI and CPP on his behalf.

Big next steps

It’s time for Alex to meet Neena’s parents, a big step in any relationship. He’s nervous but ready to impress.

Neena is also cooking up some plans to scale up her cooking business.  Stay tuned to find out what’s next for her!