A letter of authority from the Canada Revenue Agency that reduces an employee's tax at source is valid for

• A. The calendar year following issuance
• B. The calendar quarter after issuance
• C. The calendar year issued
• D. The lifetime of the employee

Answer: (C)

The concept being tested is that a CRA-issued letter authorizing a reduction in tax withheld from pay is limited to a specific calendar year. The authority is granted to affect withholding only for the year in which it is issued, reflecting that withholding needs can change annually with shifts in income, credits, or deductions. Because of that, the reduction does not carry over to future years, quarters, or for the employee’s lifetime. If the employee wants to continue with reduced withholding in subsequent years, a new letter must be issued for each new calendar year.