Pass the National Payroll Institute Payroll Fundamentals PF1 Questions and answers with CertsForce

“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)

Here, Anthony’s weekly taxable earnings are:

$750.00 wages + $25.00 cash taxable benefit = $775.00.

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.

Piecework (also called piece-rate pay) is a pay method where an employee’s earnings are determined by output—they are paid a set amount per unit produced or completed, rather than by hours worked or a fixed salary. This aligns directly with option C. A time-based hourly/daily wage (option A) is a different earnings method, and a fixed pay-per-period arrangement (option B) describes salary. Therefore, “all of the above” is incorrect because these are three distinct compensation structures.

In payroll calculations, piecework earnings are typically calculated as: piece rate × number of units produced in the pay period. Employers still have to ensure compliance with employment standards, such as minimum wage and overtime rules, even where piecework is used. A Canadian payroll educational reference defines piecework as payment for each unit produced “regardless of the amount of time taken.”

Block 11 on the ROE is “Last day for which paid.” Service Canada instructs employers to enter the last day for which the employee received insurable earnings. This date usually coincides with the last day of work, unless the employee continues to receive insurable earnings after the last day worked (for example, paid leave like vacation/sick leave or salary continuance).

In Tanya’s case, she gave notice on April 2, but her resignation is effective April 27. There’s no information indicating paid leave after April 27 or salary continuance. So Block 11 should be April 27 (the last day she worked/received insurable earnings).

The question also mentions the pay period ending April 28—that date belongs in Block 12 (Final pay period ending date), which is the end date of the final pay period that includes the Block 11 date, and is often different from Block 11.

A SIN that begins with “9” (often called a 900-series SIN) is issued to temporary workers—people who are neither Canadian citizens nor permanent residents—and who are authorized to work in Canada. Service Canada’s employer guidance explicitly states that SINs beginning with “9” are issued to temporary workers who are neither Canadian citizens nor permanent residents, and these SINs are valid only until the expiry date shown on the immigration document that authorizes the person to work in Canada.

Service Canada also advises employers to confirm that employees with a SIN starting with “9” remain authorized to work and that their immigration document has not expired.

So, options A–C are incorrect because a 900-series SIN is not for permanent residents (“landed immigrants”), not for Canadians whose SIN “expires,” and not based on working outside Canada. It specifically signals temporary status tied to work authorization in Canada.

Regular earnings for an hourly employee are calculated as hourly rate × hours worked. Because “bi-weekly” means two weeks of work paid together, you calculate one week’s regular earnings and then multiply by two (assuming the hours are the same each week and there is no overtime premium indicated).

Step 1: Weekly regular earnings:

$10.10 × 37.5 hours = $10.10 × 37 + $10.10 × 0.5

= $373.70 + $5.05

= $378.75.

Step 2: Bi-weekly regular earnings (2 weeks):

$378.75 × 2 = $757.50.

So Matt’s regular bi-weekly earnings are $757.50.

In payroll documentation, “regular earnings” are the employee’s base wages before statutory deductions (CPP/QPP, EI, income tax) and before other deductions, and they exclude any separately calculated earnings like overtime premiums or taxable benefits unless stated. This approach (rate × hours, then adjust for pay period) is the standard method used to compute gross/regular pay for hourly employees before moving on to deductions and net pay.

CRA’s method for bonus/irregular payments paid separately is to calculate income tax on the combined pay (regular pay + the irregular payment) using the regular tax tables, then subtract the tax that would apply to the regular pay alone. The difference is the income tax to withhold from the irregular payment.

Here, the semi-monthly taxable pay is:

Regular pay = $1,800.00

Regular + vacation payout = $3,200.00

Using the 2026 Alberta semi-monthly (24 pay periods) tax tables with claim code 1:

At $1,800, Federal tax = $130.45 and Alberta tax = $58.55 → Total = $189.00.

At $3,200, Federal tax = $356.50 and Alberta tax = $174.00 → Total = $530.50.

Income tax on the vacation payout = $530.50 − $189.00 = $341.50.

CPP (including the enhanced portion) is a separate statutory deduction that must also be calculated on the payout, but this question asked specifically for income tax withholding.

The CRA form used to adjust payroll income tax withholdings at source for employees who earn commission income and have commission expenses is Form TD1X – Statement of Commission Income and Expenses for Payroll Tax Deductions. The CRA explains that an employee completes TD1X if they receive commission income (or salary plus commission) and want the employer to adjust tax deductions to take commission expenses into account.

This is different from:

TD1, which is the Personal Tax Credits Return used to claim basic/personal credits and determine standard withholding (not commission-expense adjustments).

T777, which is used to claim employment expenses on the employee’s personal tax return (not to reduce payroll withholding at source).

TP-1015.R.13.1-V, which is a Quebec form used to request a reduction of Quebec income tax withholding in specific situations (not the CRA commission-expense at-source form).

Operationally, payroll should keep the TD1X on file and apply it to income tax withholding calculations until the employee updates or replaces it.

CRA requires separating a retiring allowance into an eligible and non-eligible portion. The eligible portion is the maximum that can be transferred to an RRSP/RPP under the special rules (without using regular RRSP room). The formula is: $2,000 for each year (or part-year) of service before 1996, plus an additional $1,500 for each year (or part-year) before 1989 in which the employee had no employer pension/DPSP benefit vested at the time of payment (or previously paid).

Rosa worked from 1983 to 1995 (inclusive) for pre-1996 service: 13 years × $2,000 = $26,000.

For the extra pre-1989 amount: she joined the pension plan in 1986 and was fully vested when paid the retiring allowance in 2015, so 1986–1988 do not qualify for the extra $1,500. However, 1983–1985 were years before 1989 when she had no vested employer pension benefit, so 3 years × $1,500 = $4,500.

Eligible portion = $26,000 + $4,500 = $30,500.

Non-eligible portion = $62,500 − $30,500 = $32,000.

In Canadian payroll, a benefit generally means the employer has provided something of value to the employee (or paid for something on the employee’s behalf), rather than paying cash for work performed. The CRA’sEmployers’ Guide – Taxable Benefits and Allowances (T4130)explains that a benefit/allowance may be provided in cash (for example, an allowance) or in a manner other than cash (for example, a parking space or gift), and that employers may have to include the value of that benefit/allowance in the employee’s income depending on the circumstances.

Option C best captures this “value of something provided or paid for” concept. Option B describes wages/salary (earnings for work). Option A aligns more with reimbursements/expense coverage. Option D aligns with allowances for business use of personal property (often treated separately and may be taxable or non-taxable depending on CRA rules and documentation). Payroll’s role is to determine whether the benefit is taxable, value it correctly, and apply the right statutory withholdings and reporting.

Taxable gross for the period = $1,600.00 + $30.00 = $1,630.00 (a taxable allowance is included in income for tax withholding).

Using CRA T4032-AB (Biweekly, 26 pay periods) with claim code 2:

Federal tax at pay $1,630 falls in the $1,619–$1,635 range → CC2 = $107.35.

Alberta provincial tax at pay $1,630 falls in the $1,628–$1,644 range → CC2 = $46.55.

Subtotal tax from the tables = $107.35 + $46.55 = $153.90.

CRA notes these tax tables build in the tax credits for CPP/EI, so when CPP is not deducted (because annual max already reached), you must increase tax withholding accordingly.

CPP that would have been deducted this pay (using CRA rates/YBE):

Pensionable = $1,630 − ($3,500/26 = $134.62) = $1,495.38; CPP (4.95% + 1.00% = 5.95%) = $88.98.

Add back missing credits: Federal 14% × 88.98 = $12.46; Alberta 8% × 88.98 = $7.12 → total $19.58.

Final total tax = $153.90 + $19.58 = $173.48.