National Payroll Institute Payroll Fundamentals 1Exam PF1 Question # 11 Topic 2 Discussion
PF1 Exam Topic 2 Question 11 Discussion:
Question #: 11
Topic #: 2
Anthony earns $750.00 per week. He has a cash taxable benefit of $25.00 per week. Anthony is exempt from CPP contributions. Calculate the net taxable income for the week.
“Net taxable income” for payroll withholding purposes is the amount of income on which income tax is calculated for the pay period. It generally starts with the employee’s gross taxable earnings for the period (regular wages plus any taxable benefits/allowances that must be included in income), then subtracts only those deductions that are deductible for tax at source (for example, certain registered pension plan contributions, union dues, etc., if applicable). A cash taxable benefit is treated like additional remuneration and is included in taxable income. (canada.ca)
Being exempt from CPP contributions affects whether CPP is deducted, but CPP is not a “net taxable income” subtraction in this question (and in any case, no CPP is being deducted). The question also does not mention any other tax-deductible payroll deductions (like RPP contributions), so there is nothing to subtract from taxable earnings.
Therefore, Anthony’s net taxable income for the week is $775.00.
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