As a temporary foreign worker (TFW) in Quebec, it is important to understand the different amounts that appear on your pay stub. One of these deductions is federal income tax, which your employer withholds directly from your pay. This withholding is part of Canada’s tax system and serves as an advance payment toward the income tax you may ultimately owe to the Government of Canada.
What is federal income tax?
Federal income tax is a tax administered by the Canada Revenue Agency (CRA) on taxable income. When you work as an employee, your employer generally has to calculate and withhold an amount from your pay to cover this tax. That is why you may see a line on your pay stub labeled “Federal tax,” “Federal income tax,” or something similar.
This amount is not a fee charged by your employer. It is money withheld from your wages by your employer and then remitted to the tax authorities.
Why is it deducted from every paycheck?
Income tax is calculated on an annual basis. However, for employees, amounts are generally withheld throughout the year from each paycheck. To determine how much to withhold, your employer considers factors such as your income and the tax information you have provided. The CRA publishes payroll deduction tables and formulas that employers use to calculate income tax withholdings.
For example, if you are paid every two weeks, federal income tax may appear as a deduction on each of your pay stubs.
Important: the amount withheld from your pay stub does not necessarily represent the final amount of tax you will owe for the year.
How is the amount withheld determined?
The amount withheld depends on several factors, including:
- your income;
- how frequently you are paid;
- certain deductions or tax credits;
- the information provided on the applicable tax forms;
- your tax situation.
The federal tax system uses different income tax brackets. The applicable rate increases progressively as taxable income moves into higher brackets.
This does not mean that a worker earning more than $58,523 will pay 20.5% on their entire income. The applicable rate applies only to the portion of income within each tax bracket.
How does it differ from other deductions?
Your pay stub may include several different deductions, such as:
- Federal income tax
- Quebec income tax
- QPP – Quebec Pension Plan
- QPIP – Quebec Parental Insurance Plan
- Employment Insurance (EI)
It is important not to confuse these deductions.
Federal income tax is different from Quebec income tax. Both are income taxes, but they are administered at different levels of government. QPP, QPIP, and EI contributions, on the other hand, help fund specific programs and are calculated according to different rules.
Do temporary foreign workers also have to pay federal income tax?
Yes. Being a temporary foreign worker does not automatically exempt you from paying income tax in Canada. If you work in Quebec and receive taxable employment income, federal and provincial income tax may be withheld directly from your pay.
Your tax situation can depend on several factors, including your income, how long you stay in Canada, and your tax residency status. Having a temporary work permit alone does not determine how much tax you will ultimately owe.
Is the amount withheld the final tax you have to pay?
Not necessarily. The amounts withheld during the year are tax withholdings at source. When you file your income tax return, the tax authorities determine how much tax you actually owe based on your tax situation and any credits or deductions you may be entitled to claim.
As a result, you could:
- receive a refund if too much tax was withheld;
- have a balance owing if not enough tax was withheld;
- or have a result that is relatively close to zero.
That is why it is important to keep your tax documents and review the information on your pay stubs.
What should you check on your pay stub?
Each time you receive your pay, check the following:
- Your gross pay: the amount you earned before deductions.
- Federal income tax: the amount withheld for federal income tax.
- Quebec income tax: the amount withheld for provincial income tax.
- Other contributions: QPP, QPIP, and EI, when applicable.
- Your net pay: the amount you actually receive after deductions.
Understanding these amounts can help you better understand your earnings and identify a possible payroll error more easily.
What happens when you file your tax return?
At the end of the tax year, you must file an income tax return if you are required to do so. Your income and the amounts withheld during the year will be taken into account when determining your tax situation.
Your employer will also provide you with tax documents that allow you to report your income and the amounts withheld.
Therefore, the federal income tax shown on each pay stub is part of the annual tax process and should not be confused with the final result of your income tax return.
As a TFW in Quebec, reviewing your pay stub is a good way to understand how much you earn, how much is deducted, and how much you actually receive.
Federal income tax is an amount withheld directly from your pay by your employer and remitted to the tax authorities. The amount withheld may vary depending on your situation and does not necessarily correspond to the final amount of tax you will owe when you file your income tax return.
InfoTET d’Immigrant Québec provides information and support to temporary foreign workers in Quebec. To learn about your specific tax obligations, you can consult the Canada Revenue Agency (CRA) and Revenu Québec, or seek advice from an authorized tax professional.
