PF1 Exam Dumps - National Payroll Institute Payroll Fundamentals Questions and Answers

The CRA defines a benefit as something the employee receives when the employer pays for or gives something that is personal in nature (a good or service), either directly to the employee or through a third party. CRA’s T4130 guide describes a benefit as a good or service you give (or arrange for) such as free use of employer property, and it is the value of that benefit that may need to be included in the employee’s income if taxable.

This matches the wording in the question: “dollar values attributed to something the employer has either provided…or paid for…on an employee’s behalf.” By contrast, earnings are pay for work performed (salary, wages, commissions). Allowances are fixed amounts paid to help cover anticipated expenses without receipts (often taxable unless an exception applies). Expense reimbursements repay actual business expenses (typically supported by receipts) and are generally not treated as earnings.

So the correct classification is Benefits.

Step 1 — Mara’s gross earnings / taxable earnings components

Semi-monthly salary = $54,500.00 ÷ 24 = $2,270.83

Life insurance coverage = 2 × $54,500 = $109,000

Monthly premium (excl. tax) = 109 × $0.57 = $62.13

9% insurance premium tax = $62.13 × 1.09 = $67.72

Semi-monthly taxable benefit = $67.72 ÷ 2 = $33.86

Health premium (excl. tax) = $260.00

9% insurance premium tax = $260.00 × 1.09 = $283.40

Semi-monthly taxable benefit (Quebec) = $283.40 ÷ 2 = $141.70

GTE (total taxable in Quebec) = 2,270.83 + 33.86 + 141.70 = $2,446.39

Step 2 — Pensionable earnings (PE)

For this calculation, treat salary + taxable group term life as pensionable for QPP withholding, while EI remains non-insurable for non-cash benefits.

PE = 2,270.83 + 33.86 = $2,304.69

Step 3 — Insurable earnings (IE)

IE = salary only = $2,270.83

Step 4 — Net taxable income (CRA) (NTI)

Federal taxable income uses salary plus taxable benefits used for federal withholding tables here.

NTI (CRA) = $2,304.69

Step 5 — Net taxable income (RQ) (NTI)

NTI (RQ) = $2,446.39

Step 6 — QPP contribution

Use the QPP employee rate (basic + additional) and apply the basic exemption prorated per pay period.

Basic exemption per semi-monthly period = $3,500 ÷ 24 = $145.83

Contributory earnings = PE − 145.83 = 2,304.69 − 145.83 = $2,158.86

QPP = 2,158.86 × 6.4% = $138.17

QPP = $138.17

Step 7 — EI premium

Quebec EI employee rate for 2026: 1.30%.

EI = 2,270.83 × 0.0130 = $29.52

Step 8 — QPIP premium

Use the Revenu Québec employee QPIP rate shown for 2026.

QPIP = 2,270.83 × 0.00430 = $9.76

Step 9 — Federal income tax

From the CRA Quebec federal tax deductions table (24 pay periods), at pay $2,304.69 (range 2288–2306) and claim code 3, the federal tax is:

Federal tax = $139.95

Step 10 — Quebec provincial income tax

From TP-1015.TI.24 (24 pay periods) at remuneration $2,446.39 (range 2445.00–2464.99) and deduction code C, the tax is:

Quebec tax = $214.81

Step 11 — Total deductions

QPP 138.17

EI 29.52

QPIP 9.76

Federal 139.95

Quebec 214.81

= $532.21

Total deductions = $532.21

Step 12 — Net pay

Net pay is based on cash pay (salary) minus deductions (tax still applies even when part of taxable income is a benefit).

Net pay = 2,270.83 − 532.21 = $1,738.62

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.

The CRA’s prescribed interest rates are established for specific periods labelled by calendar quarter (for example, “first calendar quarter 2026”), and CRA publishes the rate schedule by quarter.

This prescribed rate is used in multiple tax contexts, including calculating taxable benefits on certain interest-free or low-interest employee/shareholder loans, and it also relates to interest charged/paid by the CRA on overdue amounts and overpayments (with different rates for different situations).

Because CRA’s publication is organized and effective by quarter (e.g., Jan 1–Mar 31; Apr 1–Jun 30; Jul 1–Sep 30; Oct 1–Dec 31), the correct answer is each calendar quarter (option D), not monthly, semi-annual, or annual.

Termination notice requirements come from the employment standards legislation that applies to the workplace, which is tied to the jurisdiction where the employee works (province/territory), unless the workplace is federally regulated. The Government of Canada explicitly directs employers and employees to consult the employment standards for the province or territory of work if they are not in a federally regulated industry.

Within a given jurisdiction, the minimum notice (or pay in lieu) is typically based on the employee’s length of continuous employment/service. For example, under the Canada Labour Code (federally regulated workplaces), required notice increases with service (and can be replaced with wages in lieu), showing service length is a core driver of notice entitlements.

That’s why “where they live” is not the deciding factor for notice rules: the governing employment standards are based on the jurisdiction of employment (where the work is performed / the employment is regulated), and the employee’s length of service under that jurisdiction’s rules.

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.

“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.

Because the plan is for the president only, it is a non-group insurance plan (a plan offered to an individual employee). The CRA states that when an employer pays premiums or makes contributions to a non-group insurance plan, the amounts paid are a taxable benefit. The CRA explicitly includes sickness or accident, disability, and income maintenance plans in this non-group category.

This benefit is generally treated as a non-cash taxable benefit because the employer is paying the premium directly to the insurer (the employee receives the coverage, not cash). CRA guidance distinguishes cash benefits (paid as money, reimbursements, or allowances) from benefits provided in a manner other than cash.

Payroll must therefore include the value of the employer-paid premium in the employee’s taxable income and report it on the appropriate slip (commonly T4 code 40 for current employees, as noted in CRA instructions for insurance premiums).

The CRA defines a retiring allowance (also called severance pay) as an amount paid when or after an employee retires or loses their job, in recognition of long service or for the loss of employment.

However, the CRA is also explicit about what a retiring allowance does not include. It does not include “salary, wages, bonuses, [or] overtime,” which rules out bonus/incentive pay and accumulated overtime in the options. It also does not include “payments for accumulated vacation leave not taken,” which rules out vacation pay as a retiring allowance. Finally, it does not include wages in lieu of termination notice, which rules out wages in lieu (including legislated notice pay) as a retiring allowance.

Because every listed item is specifically excluded by CRA guidance, the correct answer is None of the above (E).

For payroll withholding, income tax is calculated on taxable income for the pay period, so only deductions that are income-tax deductible (or otherwise reduce taxable income at source) will reduce the employee’s taxable base for withholding. Employee contributions to an RRSP are generally deductible for the employee, which is why payroll-deducted RRSP contributions (such as contributions to a group RRSP taken off the paycheque) reduce the amount of income tax withheld when the payroll system is set up to treat them as deductible contributions. The CRA confirms that deductible RRSP contributions can be used to reduce your tax.

By contrast, paying provincial health care premiums (where applicable) and paying an employee share of group benefit plan premiums are not automatic “reduce taxable income at source” deductions in the same way for payroll withholding; they may be personal expenses and, depending on the plan/premium type, may only affect the employee’s personal tax situation through credits/deductions when filing, not the standard payroll withholding base. Therefore, the only correct choice is A.