GLOSSARY

Canadian Financial, Real Estate and Mortgage Glossary

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Payroll Taxes


Synonyms:income tax, pay as you earn tax, withholding tax
Filed Under: financial-banking, taxation
Tags: banking, taxes
 

Definition of payroll taxes

payroll taxes
1. A tax based on wages, tips and salaries paid. The tax is deducted from the employees pay.

Related Terms and Acronyms:

  • average tax rate   The real rate of taxes you pay after taking into account the various federal tax brackets. There are different tax rates for different levels of income; you pay lower rates on the first part of your income, more on the later earnings. As you pass each income level, the money above that level is taxed at the next higher rate. Therefore, your average tax rate is less than the top rate you pay on a portion of income.
  • Canada Pension Plan (CPP)   A public pension plan administrated by the Canadian government.
  • constructive receipt   The idea in which a taxpayer does not actually have to take possession of money for it to be taxable. An example of this is when savings account interest is reinvested rather than sent to the account holder as a separate payment. In this case, the account holder constructively received the interest because the earnings were credited to his account and could have been taken out at the owner's discretion. As such, the earnings are taxable.
  • direct tax   A tax that is paid straight to the government.
  • fringe benefit   Employee compensation other than your wages, tips and salaries, such as health insurance, life insurance and pension plans. Usually referred to as a Bonus.
  • garnishment   An amount withheld from your pay and remitted to another party, such as a creditor. You must include in your taxable income any amount that was garnished from your pay, because the full amount of your pay is considered to have been received by you even though some was withheld to pay your debts.
  • income tax   The main source of revenue for the federal government and many Provinces. The tax is based on your earned and unearned income. The amount or percentage taxed is based on the amount of income, using the governments graduated tax scale.
  • income-splitting   A financial strategy used for tax purposes to reduce the overall tax burden on a family. Income is shifted from one family member to another who is in a lower tax bracket, so the income is taxed at the lower rate to save the family money.
  • old age security (OAS)   A Canadian pension plan for eligible Canadians over the age of 65.
  • ordinary income   Income that does not qualify as a capital gain including wages, interest, dividends, and net income from a business.

More Related Terms and Acronyms

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Mortgage Product Type Inquiries
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