What Is a TD1?

A TD1 is a Canadian tax form used to determine how much income tax should be deducted from an employee’s pay. It reflects the employee’s personal tax credits, including the Basic Personal Amount (BPA) and any additional amounts they may be eligible to claim.

How ZonePayroll Uses TD1 Information

At ZonePayroll, only TD1s set at the Basic Personal Amount (BPA) are indexed annually.

TD1s that include additional claimed amounts are not indexed, as these values depend on the employee’s specific, individual tax situation and must be updated manually.

TD1 Reminder Banner (Important)

You may see a TD1 reminder banner on an employee record when:

• No TD1 exists for the current year.

• The employee is using TD1 values from a prior year (whether basic or other amounts).

Important Notes:

• Warning vs. Error: This is a warning message, not an error.

• No Blocking: It will NOT stop your pay run.

• Process as Normal: Payroll can be processed as usual.

The banner is intended to inform, not block payroll. It helps you identify employees who may need a TD1 review. To remove the banner, simply create a new TD1 for the current year.

Additional Tax Amounts Carry Forward

If an employee has requested an additional tax amount to be withheld, this election will automatically carry forward into the new year.

Key Requirements & Actions

• No Change Required: If the additional withholding amount remains the same for the new tax year, no action is required from the payroll administrator or the employee.

• Updates or Removals: If the employee wishes to update or stop the additional withholding, they must submit a new TD1 (Federal) or TD1 (Provincial) form.

• System Continuity: The system will continue to deduct the additional tax amount based on the most recent TD1 on file until a new form is processed.

How to Review an Employee’s TD1 Setup

To see which TD1 information is currently being used for an employee:

1. Open the Employee Record.

2. Review the Tax Profile.

This section indicates whether taxes are being calculated using the Basic Personal Amount (BPA) or specific amounts from an existing TD1.

CRA Requirements & Best Practices

The Canada Revenue Agency (CRA) requires employees to submit a TD1:

• At the time of hire.

• Within 7 days of any significant change to their tax situation.

• CRA | Set Up and Manage Individual Payroll Information 

• CRA TD1s Forms

Best Practice: While employees are not legally required to submit a TD1 every year, we strongly recommend requesting a TD1 confirmation whenever an employee’s tax situation changes.

Recommended New-Year Payroll Process

We recommend including a TD1 review as part of your annual New-Year payroll process. At the start of each year, ask employees to:

• Submit a new TD1, OR

• Confirm that their existing TD1 information remains accurate.

This process helps:

• Prevent year-end tax surprises.

• Improve payroll accuracy.

• Reduce manual adjustments later in the year.

• Maintain CRA compliance.

How Payroll Calculates Taxes

Creating or Updating a TD1

To create or update a TD1, please refer to our step-by-step guide:

👉 How to Create or Update a TD1