Who issues the letter of authority that reduces tax at source?

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Prepare for the Canadian Payroll Compliance Legislation Exam. Study with multiple choice questions, each accompanied by hints and explanations. Get ready for your certification exam!

Multiple Choice

Who issues the letter of authority that reduces tax at source?

Explanation:
Tax withheld at source is governed by federal income tax rules administered by the Canada Revenue Agency. When an employee’s withholding needs to be adjusted, the CRA can issue a letter of authority that allows the employer to reduce the amount withheld at source for that employee. CPP and EI are separate payroll deductions for social insurance, not income tax, so they don’t issue this type of authorization. Provincial tax authorities handle provincial portions of tax, but the standard authority to issue a general reduction in tax at source is the CRA.

Tax withheld at source is governed by federal income tax rules administered by the Canada Revenue Agency. When an employee’s withholding needs to be adjusted, the CRA can issue a letter of authority that allows the employer to reduce the amount withheld at source for that employee. CPP and EI are separate payroll deductions for social insurance, not income tax, so they don’t issue this type of authorization. Provincial tax authorities handle provincial portions of tax, but the standard authority to issue a general reduction in tax at source is the CRA.

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