Hiring a new employee comes with a few payroll details to get right before their first paycheck. One of them is the TD1 form.

The TD1 Personal Tax Credits Return tells you what personal tax credit amounts to use when calculating income tax deductions from an employee’s pay. It’s an essential payroll document for a new job, but it isn’t the employee’s annual tax return. New employees complete a federal TD1 and, depending on their circumstances, may also need a provincial or territorial form.

As the employer, your job is to provide the right forms, collect completed copies, review them for required information, enter the applicable total claim amounts into payroll, and keep the forms securely. This guide walks through that process, with a checklist you can add to your new employee onboarding process.

What is a TD1 form?

A TD1 Personal Tax Credits Return is a Canada Revenue Agency (CRA) form employees complete so you know how much income tax to deduct from their pay. It records the personal tax credit amounts used for payroll deductions. It doesn’t calculate the employee’s final income tax bill or replace their annual tax return.

The basic personal amount is the starting credit on the TD1. Depending on their circumstances, an employee may also claim other non-refundable tax credits, such as the age amount, disability amount, tuition amount, spouse or common-law partner amount, or Canada caregiver amount.

For employers, the important part is knowing where your responsibility starts and stops. Your employee decides which personal tax credits and claim amounts apply to them. You use the total claim amount they provide, along with information such as their income, province of employment, and pay period, to calculate payroll tax deductions.

You don’t need to interpret an employee’s personal circumstances or tell them which tax credits to claim. If they have questions about what applies to them, direct them to the current CRA instructions or a qualified tax professional.

Which TD1 forms should a new employee complete?

Every new employee should complete the federal TD1 Personal Tax Credits Return. Employees who claim more than the basic personal amount also complete the applicable provincial or territorial TD1. In Quebec, employees complete the federal TD1 plus the applicable Revenu Québec source deductions form. Always use forms for the year the employee will be paid.

The CRA keeps the current federal, provincial, and territorial TD1 forms in one place.

Provide a link to the form, give the employee a paper copy, or use an electronic TD1 process that meets CRA requirements. Some payroll systems may ask for both federal and provincial or territorial total claim amounts during setup, even when only the basic personal amounts apply.

Employees who need help calculating partial credit amounts can use the worksheet included with the TD1. They keep that worksheet for their own records; you only collect the completed TD1.

Which TD1 form should you collect?

The employee determines which claims apply to their situation. Your job is to collect the completed forms and use the information they provide for payroll.

What TD1 information should employers collect from a new employee?

For payroll setup, collect the employee details needed for payroll, their completed TD1 forms, and their certification. This includes their legal name, Social Insurance Number (SIN), province or territory of employment, federal and applicable provincial or territorial total claim amounts, and any additional tax instructions. Collect the completed forms rather than relying on claim amounts provided verbally.

Employee details

• Full legal name
• Current address
• Date of birth, where needed for payroll setup
• Social Insurance Number (SIN)
• Province or territory of employment
• Employment start date

TD1 information

• Completed federal TD1
• Completed provincial or territorial TD1, when applicable
• Federal total claim amount
• Provincial or territorial total claim amount, when applicable
• “More than one employer or payer” selection, if checked
• Any additional tax the employee asks you to deduct
• Other instructions completed on the form
• Special forms or a CRA letter of authority, when required

Collect the TD1 itself, not just the total claim amount. The employee completes and certifies the form; you use the information they provide to set up their payroll tax deductions.

Certification

Before storing the TD1, check that the employee has signed and dated it or certified it electronically. Confirm the required fields are complete, too.

Banking details, pay rate, employment agreements, and benefit elections may also be part of onboarding a new employee, but they’re separate from the TD1 process.

What should employers know about multiple jobs, extra tax, and special situations?

Employees with more than one employer or payer at the same time may need to handle their personal tax credits differently. They can also ask you to deduct additional tax from each pay. If they want less tax deducted for certain deductions or credits that aren’t included on the TD1, they generally need authorization from the Canada Revenue Agency (CRA). 

What happens when an employee has multiple jobs?

If an employee has already claimed personal tax credits with another employer or payer, they may need to select the “More than one employer or payer at the same time” option on their TD1 and enter zero as their total claim amount. Direct them to the current TD1 instructions if they’re unsure what applies to them. 

What if an employee wants more or less tax deducted?

An employee can request additional tax deductions by completing a revised TD1 and specifying how much extra they want deducted from each pay. They may choose to do this to reduce the possibility of owing a balance at tax time.

Requesting less tax works differently. For certain deductions or credits not included on the TD1, such as employment expenses, child care expenses, charitable donations, or deductible RRSP contributions, the employee needs a CRA letter of authority. Once you receive it, follow the amount specified in the letter.

Eligible commission employees who want commission expenses considered when calculating their tax deductions can complete Form TD1X.

What should an employer do after receiving a TD1?

After you receive a completed TD1, review it before entering the information into payroll. Check the total claim amount, look for additional instructions on the back, and make sure the employee has signed and dated the form or certified it electronically. Don’t change the employee’s claim amounts yourself. Use the information they provided to calculate the appropriate income tax deductions.

What are the steps after collecting a TD1?

Follow this four-step workflow:

1. Review the form
   Check that the required information is complete and the total claim amounts are clear. Look for any request to deduct additional tax.
2. Enter the information into payroll
   Add the federal and applicable provincial or territorial claim amounts, along with any additional tax deductions. Confirm the employee’s province of employment so you use the correct tax tables.
3. Check the first payroll calculation
   Review the employee’s first pay to make sure you entered their TD1 information correctly.
4. Store the TD1 securely
   Keep the completed form with the employee’s payroll records and limit access to people who need it. Don’t send the TD1 to the CRA unless the CRA asks for it.

What about electronic TD1 forms?

If you create your own electronic TD1 process, follow the CRA’s electronic TD1 requirements. You need a way to authenticate the employee’s identity, record their certification and submission date, and keep the form readable and accessible. The form must mirror the CRA-approved TD1 and be stored in a format that can’t be altered.

How do you enter TD1 information in Wave?

Once you’ve collected the completed TD1 forms, enter the employee’s federal and provincial or territorial total claim amounts in their tax profile in Wave Payroll*. Wave uses the tax information you enter to calculate applicable payroll taxes and deductions. Keep the completed TD1 forms with your payroll records after you’ve entered the information in Wave.

To enter an employee’s TD1 information:

1. Go to Payroll > Employees
2. Select the employee
3. Select Tax Details
4. Enter the required tax details from the employee’s completed federal and provincial or territorial TD1 forms
5. Select Save

Changes to an employee’s payroll tax profile apply to the next pay period. If you don’t enter any TD1 amounts, Wave defaults to the applicable basic personal claim amounts for both federal and provincial or territorial taxes. You should still collect and retain the employee’s completed TD1 forms.

For detailed instructions, see how to add or edit employee payroll tax details. Find answers to other common TD1 form questions in the Wave Help Center.

When does an employee need to complete a new TD1?

An employee doesn’t need to complete a new TD1 every year. They should complete a new form when they start a new job, want to change amounts they previously claimed, want more tax deducted from their pay, or have a change that affects their personal tax credits. When a change affects the personal tax credit amounts they can claim, the CRA says they must complete a new TD1 within seven days.

For example, an employee may need to update their TD1 when a change affects an amount they’re claiming for a spouse or common-law partner, dependant, disability, tuition, or another applicable tax credit. They may also submit a new TD1 if they want you to deduct additional tax from each pay.

When an employee gives you a revised TD1, review the form and update their payroll information so future income tax deductions use the applicable claim amounts. See the CRA’s current guidance on when employees should complete a TD1 for more information.

What if a new employee’s TD1 is missing or incorrect?

If a new employee doesn’t give you a completed TD1, you still need to calculate and remit their payroll deductions. The CRA says to calculate their income tax deductions using only the basic personal amount estimated based on their income. If you believe a TD1 contains false or deceptive information, you must also deduct tax allowing only the basic personal amount.

How should you handle common TD1 problems?

What should be on a TD1 form checklist for new employees?

A TD1 checklist helps you collect the right forms, review them before payroll, and keep the information organized afterward. Use it for each new hire: provide the applicable forms, check the claim amounts and instructions, enter the information into payroll, and store the forms securely. A consistent checklist helps you cover each step without relying on memory.

New employee TD1 checklist

Before the employee starts

• Send the current federal TD1
• Send the applicable provincial or territorial TD1
• Provide instructions for submitting the forms securely
• Check whether a special form may apply, such as TD1X or TD1-IN

When the forms are returned

• Confirm the employee’s legal name
• Confirm the form year matches the year they’ll receive pay
• Confirm the total claim amount is completed
• Review the “More than one employer or payer” selection
• Check for a request for additional tax
• Review the back of the form for additional instructions
• Confirm the employee signed and dated the form or completed the required electronic certification
• Collect a CRA letter of authority when required

Before running payroll

• Enter the federal total claim amount
• Enter the provincial or territorial total claim amount, when applicable
• Enter any requested additional tax deduction
• Confirm the correct province of employment
• Review the first payroll calculation

After payroll setup

• Store the completed forms securely
• Don’t send the TD1 forms to the CRA unless requested
• Record when the tax information was entered into payroll
• Remind the employee to provide a new TD1 when their personal tax credit amounts change
• Keep the checklist with the employee’s onboarding records

What should employers remember about TD1 forms for new employees?

A TD1 form for new employees gives you the tax information you need to calculate payroll deductions. As the employer, provide the applicable forms, collect the completed copies, review the information, enter the total claim amounts into payroll, and store the forms securely. The employee determines which tax credit amounts apply to their situation.

A TD1 isn’t an annual tax return. Employees generally don’t need to complete a new one every year unless their circumstances or requested deductions change. When they provide an updated form, review it and update their payroll information as needed.

Wave Payroll can help you keep employee tax details organized and use the information you enter to calculate payroll deductions.