If you're a small business owner or global company with employees in Canada, there’s a good chance you’ve heard of a TD1 form—but like many employers, you may not fully understand what it is or why it's important.
Payroll compliance in Canada involves more than just paying employees on time. One of the most critical (and often overlooked) components is collecting and managing TD1 forms correctly.
In this blog, we’ll walk you through what TD1 forms are, why they matter, who needs to fill them out, and how you can stay compliant as an employer.
A TD1 form (short for Personal Tax Credits Return) is a form issued by the Canada Revenue Agency (CRA). It’s used by employers to determine how much income tax to deduct from an employee’s pay.
There are two types of TD1 forms that every employee needs to complete:
TD1 (Federal): Covers federal tax credits and deductions.
TD1-XX (Provincial/Territorial): Specific to the province or territory where the employee works (e.g., TD1ON for Ontario, TD1BC for British Columbia).
The form(s) will look something like this:
Note: Example of the first page of the 2025 Federal TD1 above.
TD1 forms directly affect how much income tax is withheld from an employee’s paycheck. If these forms are not completed or updated properly, it can lead to issues such as:
Under-deductions: The employee could owe money to the CRA at tax time.
Over-deductions: The employee may be unnecessarily overtaxed and need to wait for a refund.
CRA Penalties: Employers are responsible for collecting and using this form to determine accurate payroll deductions. Not doing so can result in compliance issues or penalties.
In short, getting TD1 forms right helps both your business and your employees avoid tax surprises and potential legal trouble.
You must ask your employees to complete a TD1 form if:
They are starting a new job with your company.
They want to change their tax credit amounts (for example, after getting married or having a child).
They want to request additional tax be deducted from their pay.
They have multiple jobs and need to coordinate their tax credits.
It’s important to note that only employees (not independent contractors) need to complete TD1 forms. And this applies regardless of their residency or citizenship—if someone is working for you in Canada and is on your payroll, they need a TD1.
There are several times when a TD1 must be filled out:
At the time of hiring: Every new employee should complete both the federal and provincial/territorial forms before they receive their first paycheck.
When personal tax circumstances change: For example, changes in marital status, the birth of a child, or eligibility for new tax credits.
When an employee wants to increase or decrease their tax deductions.
As a best practice, employers should remind employees to review their TD1 forms at least once per year, typically in January.
Each employee must fill out two forms:
TD1 (Federal): This covers standard personal tax credits, such as the Basic Personal Amount.
TD1-XX (Provincial or Territorial): This is specific to the province or territory where the employee reports for work. It adjusts for local tax rates and credits.
For example, someone working in Alberta will complete a TD1AB, while someone in Quebec will follow a slightly different process, using a provincial form provided by Revenu Québec.
Make sure you’re using the correct version for the correct year—CRA updates these forms annually, usually in December.
TD1s are simple forms, but many employers still make avoidable mistakes. Here are a few to watch for:
Forgetting to collect the provincial form (only collecting the federal one).
Using outdated forms from previous years.
Not storing the forms properly (TD1s must be kept on file but are not sent to the CRA unless requested).
Assuming non-residents or remote employees don’t need TD1s.
Not explaining the purpose of the form to employees—especially for international hires who may be unfamiliar with Canadian tax systems.
Yes. CRA allows employers to collect digital TD1 forms as long as:
The form is identical to the CRA’s official version.
The employee electronically signs it.
The form is securely stored and accessible for review or audit purposes.
If you use HR or payroll software, this step can usually be automated as part of your onboarding process.
If you’re new to Canadian payroll, here are some quick tips to stay on the right side of compliance:
Add TD1 forms to your new hire onboarding checklist.
Download new forms each year from the CRA website.
Train your HR/payroll team (or partner with a Canadian payroll provider).
Keep signed copies on file for at least six years.
If in doubt, consult a payroll expert or accountant familiar with Canadian employment law.
You can download the latest TD1 forms from the CRA’s official website:
👉 CRA TD1 Forms (Federal and Provincial)
Make sure to choose the correct province and year before distributing them to employees.
While it might seem like just another form, the TD1 is a small but essential part of Canadian payroll compliance. It ensures the right amount of tax is deducted from employee pay, protects your business from penalties, and helps employees avoid surprises at tax time.
Whether you’re a growing small business or an international employer expanding into Canada, staying on top of TD1s is a simple step that goes a long way.