PF1 Payroll Fundamentals 1Exam Questions and Answers

Step 1 — Block 6

Bi-weekly

Step 2 — Block 8

435837159

Step 3 — Block 10

September 19, 2007 → 19092007

Step 4 — Block 11

October 28, 2019 → 28102019

Step 5 — Block 12

October 28, 2019 → 28102019

Step 6 — Block 15A (Total insurable hours)

80.00 × 27 = 2160

Block 15A = 2160

Step 7 — Block 15B (Total insurable earnings)

$1,884.62 × 27 = $50,884.74

Block 15B = 50,884.74

Step 8 — Block 17A (Vacation pay)

$52,050.00 × 6% = $3,123.00

Block 17A = 3,123.00

Step 9 — Block 17C (Pay in lieu of notice)

Weekly earnings = $1,884.62 ÷ 2 = $942.31

Pay in lieu = $942.31 × 8 = $7,538.48

Block 17C (Pay in lieu of notice) = 7,538.48

Step 10 — Block 17C (Severance)

Severance = $942.31 × 10 = $9,423.10

Block 17C (Severance) = 9,423.10

Anne has both an automobile standby charge (because the car was made available) and an operating expense benefit (because the employer paid operating costs and she did not reimburse).

1) Standby charge (leased auto): Lease cost for standby charge purposes includes GST and excludes insurance.

Monthly lease incl. GST = $198.60 × 1.05 = $208.53.

Standby charge per month = 2/3 × $208.53 = $139.02.

Days available ÷ 30 = 365 ÷ 30 = 12.17, rounded to 12.

Annual standby charge = $139.02 × 12 = $1,668.24.

2) Operating expense benefit: Personal km = 34,134 − 15,805 = 18,329.

Optional method requires the automobile be used primarily (>50%) for business; Anne’s business use is under 50%, so the optional method does not apply and the fixed rate must be used.

Fixed rate (2026) = $0.34/km → 18,329 × 0.34 = $6,231.86.

Total taxable benefit = $1,668.24 + $6,231.86 = $7,900.10.

Employer-provided parking is often a taxable benefit, generally valued at the fair market value of the parking spot. However, the CRA provides a specific exception for employees with disabilities. CRA guidance on employer-provided parking states that if your employee has a disability, the parking benefit is generally not taxable, including situations involving a severe and prolonged mobility impairment or blindness.

In Steve’s case, the fact pattern explicitly says he is physically disabled and the employer pays for his parking. Under CRA’s general rule for disability-related parking, this would generally not be included in income as a taxable benefit, meaning it is not a taxable allowance and not a taxable benefit (cash or non-cash) for payroll purposes.

Payroll should still document why the parking is being treated as non-taxable (for example, disability-related need) and ensure the treatment aligns with CRA guidance if questioned. If the facts were different (non-disability parking or preferential parking provided to employees generally), the taxable benefit rules would usually apply.

In Quebec, employees must complete a Quebec-specific source deductions form so the employer can calculate Québec income tax to withhold. Revenu Québec identifies Form TP-1015.3-V (Source Deductions Return) as the form employees complete and provide to their employer/payer for this purpose. It is part of the onboarding/payroll setup process in Quebec and is used to determine personal tax credits and any additional withholding instructions for Québec provincial income tax.

The other options are not the standard Quebec source deductions return for new employees: T1213 is a CRA form used to request a reduction in tax deductions at source (federal), TD1-AB is a provincial TD1 for Alberta (not Quebec), and T2222 is not the Quebec source deductions return. From a payroll communication standpoint, the employer should request both the applicable federal TD1 and the Quebec TP-1015.3-V, then retain them on file to support accurate withholding calculations.

In Block 6 (Pay period type), Service Canada instructs employers to enter the employee’s actual pay period type—one of the standard types such as weekly, biweekly, semi-monthly, monthly, or 13 pay periods a year.

Service Canada identifies a special rule only for employees “paid solely on commission or on salary plus irregularly paid commission”: in those cases, the employer must use a weekly pay period and average earnings using the weekly averaging formula.

Because this question specifies salary plus regularly paid commission (not irregularly paid commission), the “special situation” rule does not apply. Therefore, you enter the pay period type that matches the employer’s normal payroll cycle for that employee (for example, weekly, biweekly, semi-monthly, monthly, etc.).

A “Third Party Demand” in payroll collections commonly refers to the CRA’s Demand on a Third Party (DTP)—a legal garnishment tool used to collect a person’s debt to the government by requiring a third party (such as an employer or financial institution) to redirect funds that would otherwise be paid to the debtor. CRA guidance explains that garnishments may be issued as a Requirement to Pay (RTP), Enhanced Requirement to Pay (ERTP), or Demand on a Third Party (DTP), and that these documents apply when money normally payable to someone who owes a debt to the government must instead be paid to the CRA (or other listed federal bodies).

This aligns with option B: unpaid income tax or unpaid statutory deductions (such as payroll source deductions) can lead to CRA collection action using these legal instruments.

Child support is generally enforced under provincial/territorial family support programs, not via CRA DTP as described here. Overpaid EI benefits are typically handled through EI/Service Canada recovery processes, and “third-party creditor debt” is not a CRA-administered debt.

First calculate Ronda’s pensionable earnings for the week. Her gross pay is:

$12.50 × 40 = $500.00.

CPP is calculated on pensionable earnings after subtracting the basic exemption (the Year’s Basic Exemption, YBE), prorated to the pay period. The CRA confirms the YBE is $3,500 and the employee CPP contribution rate for 2026 is 5.95% for base CPP.

Weekly exemption = $3,500 ÷ 52 = $67.31 (rounded to cents).

Pensionable earnings subject to CPP this week = $500.00 − $67.31 = $432.69.

CPP contribution = $432.69 × 5.95% = $432.69 × 0.0595 = $25.745…, which rounds to $25.75.

This deduction continues each pay until the employee reaches the annual CPP maximum contribution for the year (at which point CPP stops for the remainder of the year).

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.

The CRA sets out that the “eligible” portion of a retiring allowance that may be transferred directly to an RRSP/RPP under special rules is based on years of service before 1996 (and potentially an additional amount for certain pre-1989 years if specific pension/DPSP conditions are met). The CRA explains the eligible part is $2,000 for each year (or part-year) of service before 1996, plus you may be able to transfer an additional $1,500 for each year (or part-year) of service before 1989 where no employer pension/DPSP benefit was vested (or previously paid) for those years.

This is why the correct basis in the answer choices is the employee’s years of service prior to 1996, not wages, age, or average earnings. Payroll needs this service history (including related employers where applicable) to correctly identify the eligible/non-eligible split and apply the right withholding and transfer reporting.

In payroll, deductions are applied in a priority order so employers satisfy mandatory legal obligations first. CRA collection tools such as a Requirement to Pay (RTP) and a Demand on a Third Party (DTP) are legal/garnishment-type deductions. CRA explains that a Requirement to Pay directs a third party (often the employer) to send amounts otherwise payable to the employee to the CRA, and the employer must comply.

Company pension contributions (where participation is required as a condition of employment or under a plan/collective agreement) are generally company-compulsory deductions—important, but they come after statutory and legal deductions. Voluntary insurance coverage is a classic voluntary deduction (the employee chooses it; it is not legally required). Voluntary deductions are normally taken last because they must not interfere with statutory/legal withholding obligations.

So among the options, voluntary insurance coverage is the one that would be withheld last in the order of priority.

CRA’s automobile benefit calculations require multiple data points because there are usuallytwo components: thestandby charge(vehicle availability) and theoperating expense benefit(personal driving where the employer pays operating costs). CRA’s guidance on employer-provided automobiles explains that standby charge calculations use the automobile’scost (capital cost) including applicable taxesand the time the vehicle wasavailableto the employee, while the reduced standby charge and operating benefit depend onkilometres drivenand the split betweenbusiness and personal use.

To determine whether areduced standby chargeapplies, you need availability plusbusiness-use requirements(which are evidenced through total/business kilometres). To calculate the operating expense benefit, you needpersonal kilometres(often derived from total kilometres minus business kilometres) or detailed personal km directly.

Therefore, the complete and correct set of required inputs is:capital cost (with sales tax), availability, total kilometres, business kilometres, and personal kilometres—which is optionD.

Block 11 on the ROE is the “Last day for which paid,” meaning the last day the employee received insurable earnings. In most terminations, this is the employee’s last day of work. Service Canada notes Block 11 only moves beyond the last day worked when the employee continues to receive insurable earnings after the last day of work due to paid leave (such as vacation leave or sick leave) or salary continuance.

In this question, Charmaine’s employment ended April 13, and she received a lump-sum final pay that included wages in lieu of notice and vacation pay. These amounts are typically reported as special payments (for example, pay in lieu of notice is reported as such), but they do not automatically change Block 11 unless they are paid as an actual paid-leave period or as salary continuance (where regular pay continues and the ROE is not issued until the continuance ends).

Service Canada’s ROE Guide is clear that vacation pay paid because of separation (termination/layoff) must be reported in Block 17A – Vacation pay.

But it doesn’t stop there. Vacation pay is generally insurable earnings, so when you enter insurable earnings in Block 17A, you must also add those amounts into Block 15B (Total insurable earnings) and into Block 15C, Pay Period 1 (P.P. 1) as applicable. The ROE Guide explicitly states: when you enter insurable earnings in Blocks 17A/17B/17C, you must also add them to the totals in Blocks 15B and 15C (P.P. 1 field)—and it gives the example that vacation pay paid on separation must be added to 15B and 15C because it is insurable.

Therefore, vacation pay on termination is recorded in Blocks 15B, 15C P.P. 1, and 17A (option C).

Step 1 — Gross Taxable Earnings (GTE)

Salary per pay: 49,500 ÷ 24 = $2,062.50

Taxable car allowance: $50.00

Group term life taxable benefit:

Coverage = 2 × 49,500 = 99,000

Monthly premium = (99,000 ÷ 1,000) × 0.62 = 99 × 0.62 = 61.38

Semi-monthly benefit = 61.38 ÷ 2 = $30.69

GTE = $2,143.19

Step 2 — Pensionable Earnings (PE)

PE = $2,112.50 (2,062.50 + 50.00)

Step 3 — Insurable Earnings (IE)

IE = $2,112.50

Step 4 — Net Taxable Income (CRA) (NTI)

RPP = 5% × 2,062.50 = $103.13

Union dues = 2% × 2,062.50 = $41.25

NTI (CRA) = 2,143.19 − 103.13 − 41.25 = $1,998.81

Step 5 — Net Taxable Income (RQ)

$0.00

Step 6 — CPP (base CPP)

Period exemption = 3,500 ÷ 24 = $145.83

Contributory = 2,112.50 − 145.83 = $1,966.67

CPP = 1,966.67 × 5.95% = $117.02

CPP = $117.02

Step 6B — 2nd CPP (CPP2)

CPP2 = $0.00

Step 7 — EI premium

EI = 2,112.50 × 1.63% = $34.43

EI = $34.43

Step 8 — QPIP

$0.00

Step 9 — Federal income tax (CC1, semi-monthly)

$156.10

Step 10 — Alberta income tax (CC1, semi-monthly)

$73.20

Step 11 — Total deductions

Statutory: 117.02 + 34.43 + 156.10 + 73.20 = $380.75

Other: RPP 103.13 + Union 41.25 + United Way 20.00 + Social club 5.00 = $169.38

Total deductions = $550.13

Step 12 — Net pay

Cash pay (salary + car allowance) = 2,062.50 + 50.00 = $2,112.50

Net pay = 2,112.50 − 550.13 = $1,562.37

The CRA defines a death benefit as the gross amount of any payment made on or after the death of an employee to recognize the employee’s service in an office or employment. It can be paid to a surviving spouse/common-law partner, heir, or the estate.

This is different from amounts the employee already earned before death (for example, regular wages up to the date of death, or vacation pay that was accrued/earned). CRA guidance treats wages and employment income earned up to and including the date of death as amounts to be reported on a T4 slip, not as a death benefit.

It’s also different from a life insurance payout from an insurer (which is not an employer-paid “death benefit” for payroll reporting purposes). The payroll impact is that a qualifying death benefit is generally reported as a special payment (often on a T4A), following CRA rules for deductions and reporting of death benefits.

A strong hire-authorization/onboarding checklist ensures payroll and HR collect documents needed to pay the employee accurately and enroll them in required programs. Abenefit enrollment formis a practical, common checklist item because many employers offer benefit plans that require employee elections (for example, health/dental coverage levels, beneficiary information, dependent details, etc.). Indeed’s Canadian onboarding guidance explicitly notes employers often collectbenefits enrollmentpaperwork as part of essential new employee forms and onboarding checklists.

By contrast, aT1213(Request to Reduce Tax Deductions at Source) is not routinely required for all hires; it is only used when an employee applies for CRA authorization to reduce tax withheld. A “clearance certificate” is not a standard Canada-wide payroll onboarding requirement for typical employment relationships. Therefore, “All of the above” is not correct.

Selectingbenefit enrollment formbest matches the purpose of a hiring authorization checklist: ensuring all employment setup steps are completed (pay setup, statutory forms, and benefits enrollment where offered) so payroll deductions and coverage are handled correctly from the start.

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 Northern residents deductions (often referred to as the “prescribed zone” deduction on the personal tax return) are not limited to the three territories. While all places in Yukon, Nunavut, and the Northwest Territories are in a prescribed northern zone (Zone A), the rules also designate prescribed northern and intermediate zones in parts of several provinces (for example, parts of British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, and others).

The governing framework is in the Income Tax Regulations, which define prescribed zones using geographic descriptions (latitudes/longitudes) covering areas in multiple provinces, as well as the territories.

From a payroll/HR communications perspective, the key is that this deduction is generally claimed by the individual on their income tax return (it does not change the employer’s province-of-employment withholding rules). Employees who believe they qualify should verify their community’s zone status using CRA’s prescribed zone lists before claiming the deduction.