The automatic federal or provincial payroll tax calculation is incorrect

• Improperly set incomes and/or benefits

Before starting:

• Compare the tax calculations to the CRA Payroll Deduction Online Calculator (PDOC) 
• For Quebec, use WEBRAS or the WINRAS tool
• When comparing to the CRA website, ensure that the calculations are based on the Gross Pay and not Net Pay
• Make sure that you have a Business Care plan that includes automatic payroll calculation
• If the calculations in Sage 50 match the PDOC calculator results, there may not be anything wrong
• We recommend that you speak with a certified accountant/CRA to validate the employee setup

Option 1: Verify that you have the latest tax table update

1. Install the latest Sage 50 Accounting tax table update before posting paycheques.
2. Go to Help, About Sage 50, Support Info.
3. Make sure the Payroll Taxes Effective date is current.
4. In Canada, generally, there are updates in January and in July.
   • Some exceptional tax updates may happen in other months
5. If the tax tables aren't current, install the update.

Option 2: Sage tax versus government tax calculation

1. Sage 50's payroll tax amounts are within about $1.00 of the Canada Revenue tables.
2. Small differences are to be expected because the manual tables and TOD (Tables on Diskette) calculate based on an income range, whereas Sage 50 uses the exact income amounts for greater accuracy.
3. The more income on the cheque, the greater the difference will be.
4. Larger pay cheques can result in differences of up to a few dollars, but for anything unusual, read the other possible reasons.

Option 3: Update Employees Personal Tax Credits

1. Open the employee's record and select the Taxes tab.
2. Enter the Federal Claim and Provincial Claim amounts for the current year.
3. Update the Index and Non-Index amounts if needed.
4. These amounts need to be updated on January 1 for that year.
5. Verify if the basic personal amounts were updated if some paycheques were recorded.
6. Sage 50 Payroll tax calculation is based on the federal and provincial claim amounts at the time the paycheque is posted even if the paycheque is back/forward dated.
7. If you posted a paycheque and then updated the claim amounts after, the taxes aren’t based on the updated claim amounts.

Option 4: Verify that the employee Pay Periods are correct

1. Open the employee records and click the Income tab.
2. Ensure that the Pay Periods Per Year are correct.
   • If you posted fewer paycheques than indicated, the calculation is likely incorrect
   • If you updated the Pay Periods Per Year field during the year, the calculation may be incorrect

Option 5: Verify that the correct boxes are checked to calculate tax income/benefit

1. Go to Setup, Settings, Payroll, then Incomes.
2. Ensure that all of the appropriate income types have the Calc. Tax option enabled.

Option 6: Verify that the corrected boxes are checked for deductions before or after taxes

1. Go to Setup, Settings, Payroll, then Deductions.
2. Ensure that all of the appropriate deductions have the Deduct After Tax option enabled or disabled as appropriate.
3. Improperly set deductions will cause improper income tax calculations, including if you make changes in the middle of the affected year.

Option 7: Verify that EI and CPP are set for the right amount/percentage

1. For each employee, open the employee profile, and select the Taxes tab.
2. Ensure the Deduct EI is properly checked and the employer rate is correct.
3. Ensure the Deduct CPP/QPP is properly checked.

Option 8: Verify that Linked accounts are set up properly

1. Go to Setup, Settings, Payroll, Deductions, Linked Accounts, then Taxes.
2. Ensure that all the payables, expenses, and payment adjustments tax fields are linked to the correct account.
3. It's possible that one or more linked accounts were/were manually switched during the year.
4. Check the linked accounts opening balance and make sure it's correct.
5. Ensure the start date and end date of your report are from January 1 to December 31.

Option 9: Recalculate taxes on manual paycheques

1. If one or more paycheques were created or adjusted manually, verify that the income tax amounts are correct.
2. Go to the paycheque in question and click Recalculate Taxes.

Option 10: Check historical opening balances

1. The first time you set up your company in Sage 50, you are in history mode.
2. The history mode allows you to enter opening balances including payroll.
3. These opening balances will be added to the payroll year-to-date total.
4. Verify that the opening balances are correct.

Option 11: Check for Post-dated Paycheques

1. You can post-date a paycheque into a future year if you’re using the Premium (or higher) product edition.
2. Sage 50 will calculate the taxes based on the tax tables installed at the time of posting the paycheque.
3. Review your postdated paycheques and make sure the tax calculation is correct.

Option 12: Check if the calculation is the same on another computer

1. Under rare circumstances, Microsoft Windows corruption causes mathematical numerical values to be calculated incorrectly.

To test this possibility:

1. Do the same paycheque on a different computer to verify if it’s also generating the same numbers.
2. If calculations are correct on the second computer, this is a computer issue.
3. Contact IT to repair or format the computer where you're getting incorrect amounts.

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