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Suggested answer

Canadian Payroll Tax Issue with Bonus and Lump Sum Payouts

Posted on by 1,540

If we try to pay a Bonus or any paycode with PayType of "Bonus" OR any paycode with a Reference of "Lump Sum Payout" on a Batch without their regular pay then only 10% tax is deducted.  We paid a Lump Sum type a year ago in a batch by itself and proper taxes were deducted but now it only takes 10%.

Here are the results of my testing:

Taxes for paycode set up with PayType "Bonus"

                           Bonus+Salary     Salary only      Difference      Bonus Only

Emp1 (40K/yr)      576                         248                      328              125

Emp2 (85K/yr)      1340                       849                     493                125

Taxes for paycode set up with PayType "Regular Pay"

                           Bonus+Salary     Salary only      Difference      Bonus Only

Emp1 (40K/yr)      670                         248                      422              193

Emp2 (85K/yr)      1385                       849                     536               189

I get the same results if I use any PayType with Reference of "Lump Sum Payout".  

I have instructed the user to use PayType of "Bonus" if paying on a separate batch in which case the add'l taxes on the Bonus amount would be $328 and $493.  If she wants to pay it as part of a regular payroll batch, to change the PayType to "Regular Pay" or use a separate pay code to deduct $193 and $189.  Still a huge difference!

I believe this to be an issue with Canadian Payroll, possibly in GP2010 or later.

Has anyone else noticed this or found a solution to this?

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  • Suggested answer
    Ray G Profile Picture
    Ray G 75 on at
    RE: Canadian Payroll Tax Issue with Bonus and Lump Sum Payouts

    I have had the same problem, same result as your testing.  We were on GP10, now GP2013, and both had the same problem.  I was told by a Dynamics partner that this was intentionally done as this is what Revenue Canada outlines.  The problem is that they need a "lump sum payment" type separate from bonus.  

    I believe that if you process the bonus along with regular pay it works, but if you want the bonus in it's own batch it treats it as a lump sum.  I continuously use detailed adjustments to adjust the taxes for all bonus pays that are done alone.

  • Accounting Department Profile Picture
    Accounting Department 1,540 on at
    RE: Canadian Payroll Tax Issue with Bonus and Lump Sum Payouts

    I did find this on the list of fixes from KB2672761 hotfix.  We are on KB2769064 already.

    Canadian Payroll: Payruns are required to handle bonus pay and regular pay on one paycheck.

    I am not sure what this fixes. It seems like the issue to me.

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