If you live near a provincial border it's not uncommon to have employees living in another province. HRM looks at the pitfalls and best practices.
At times this does cause inequity, as that employee ultimately has to pay taxes based on the rates in place in the Province of residence as at December 31st. Where an employee can establish "undue hardship" as a result of income tax withheld at source, the employee may apply for a reduction in the amount of tax to be withheld.
Application is made by completing Form T1213 - Request to Reduce Deductions at Source. This form is submitted to Canada Revenue Agency who will supply a letter of authority to reduce taxes to the employee. The employee in turn must provide this to the employer. The employer can only reduce tax deductions after receiving the official letter.
It is extremely important for the employer to follow the instructions contained in the letter very carefully to determine how to provide tax relief at source.
- Natasha Smyth, B.SC.(Agr.), CPM