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January 14, 2021
Question

Payroll Tax Calculation on Bonus

  • January 14, 2021
  • 3 replies
  • 0 views

My employer kindly gave some employees a Christmas bonus without telling me or running it through QBO payroll.  I now need to create a bonus cheque in Quickbooks online payroll to track the bonus correctly.  I understand how to create a bonus cheque in QBO, but no matter what I do, the tax calculations are way off.  I compare all payroll cheques created in QBO payroll to the CRA payroll calculator as a double check.  Normally the two systems are identical or if there's a discrepancy I can find the source of the problem.  However, when it comes to recreating the bonus cheques in QBO, the source deductions calculations in QBO are very different from the CRA payroll calculator. 

 

For instance, I need to create a net pay cheque of $750.00 so I selected the QBO net pay bonus calculation option.  QBO indicates the following calculations for this employee that has NOT met CPP or EI maximums for 2020:

Gross Bonus Payment should be: $1,130.57

Income Tax:  $303.36

Employee EI:  $17.86

Employee CPP: $59.35

Employer EI:  $25.00

Employer CPP: $59.35

Net Pay:  $750.00

 

If I enter a gross payment of $1,130.57 in the CRA payroll calculator to double check the QBO calculations I show the following:

Income Tax:  $100.84

Employee CPP:  $52.29

Employee EI:  $17.86

Employer CPP: $52.29

Employer EI:  $25.00

Net Pay:  $959.58

 

That's a discrepancy of over $200.00 and I can't figure out why.  I thought the discrepancy may stem from the 2021 TD-1 tax update so I manually changed the amounts back to the 2020 amounts and it is still calculating incorrectly.   Is there something I'm missing that would cause such a discrepancy?

 

3 replies

December 2, 2021

Going through the same thing. I used the PDOC to calculate, but I was hoping we could do this inside QBO. Like, have a payroll calculator inside of QBO. The feature I'm looking for is calculating the bonus AND being able to use what I call the "Total Pay" as opposed to the Net Pay or Gross Pay method. Total Pay will be total amount the company will pay out...includes the employees net pay, EI, CPP, Fed, Prov, and then the employers EI and CPP. 

 

I'm hoping someone will provide a solution or explanation why the Income Tax amount does not compute as expected.

December 2, 2021

Hi there dustincometa,

 

it's vital that all your payroll be entered correctly in the system so that your yearly totals cna be accurate. QuickBooks Online allows you to run Bonus-only pays in order to pay out bonuses to your employees. I can provide some information about bonuses.

 

QuickBooks Online Payroll calculates the pay based on the information entered in the system as well as the regulations provided by the federal and provincial governments. If you'd like to adjust this amount when running payroll, you can click on the Pencil icon located next to the employee in question when running your pay run and editing the amounts of taxes.

 

There isn't any way to calculate a bonus in QuickBooks Online based on Total pay, as it needs to be based on either Net or Gross pay. I can see that being able to calculate this amount based on the total pay and contributions would be a feature that you'd like to see to be able to run your payroll. I recommend you leave feedback in the system by clicking on the Gear Icon, then Feedback. Comments made in that section are taken into consideration when designing new features for QuickBooks Online. I'll pass along your feedback on my end as well.

 

If you have any other questions, feel free to reach out here.

LeithG
December 2, 2021

Hi Jessica_G

 

The bonuses do not occur in a vaccum, but impact the overall salary for the year.  This example from the CRA site might help to highlight the differences in the calculation:

https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/payroll/payroll-deductions-contributions/special-payments/example-1-first-once-a-year-bonus-payment.html