https://www.daemonology.net/blog/2023-12-31-Canadian-payroll-dependency-chart.html

Daemonic Dispatches

Musings from Colin Percival

A Canadian payroll dependency chart

The Canada Revenue Agency publishes, on a regular basis (they're now
up to the 119th edition), a document entitled "Payroll Deductions
Formulas". This document contains all of the formulas needed to
calculate payroll deductions collected by the CRA: Canada Pension
Plan, Employment Insurance, and Income Tax. As someone running a
small business in Canada and not wanting to use an external payroll
provider, I implement these formulas myself in a spreadsheet.

Unfortunately, like most aspects of the tax system, this steadily
increases in complexity, and this year with the Canada Pension Plan
including not just "base" premiums and "additional" premiums but also
"second additional premiums", I needed to rewrite my spreadsheet from
scratch; and also very unfortunately, the authors of the document
have failed to grasp an essential detail of software: You have to
calculate values before you use them. This results in a document
requiring constant jumping back and forth to find where each value is
calculated -- before or after it is used.

To help myself keep everything straight, I decided to draw a
dependency chart using GraphViz. There are 79 nodes in the graph,
starting with values like "Year's Annual Maximum Pensionable
Earnings" ($73200 in the 2024 tax year), and ending up with "Total
payroll deductions". Note that I did not write the formulas onto the
chart -- I simply recorded which other values they depend upon, so
someone (aka myself) looking at the chart can figure out what to
calculate first without going around in circles.

Oh, and to keep things simple, I assumed I wasn't dealing with
commissioned employees, employees entering or exiting the Canada
Pension Plan, or anyone resident in Quebec, Nova Scotia, Yukon, or
Ontario (each of which has their own special tax complications).

Here's what it looks like; click for a full size version (warning,
5627x2033 image):
[payroll-sm]

Posted at 2023-12-31 00:00 | Permanent link | Comments
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