April tax returns bring May tax refunds
The month of April has come and gone. For some of us Canadians, April marks the long wait to the month of May and real spring weather; for others, April is the rush to file their taxes to get the refund they are accustomed to.
Are you one of the latter? If you find that you get a tax refund from CRA every year, you may be lending too much money to government from your pay cheque. Why call it a loan? When you pay your taxes throughout the year out of your hard-earned wages or salary, you are lending this money. You could keep overpayments in your own pocket and using it yourself.
Many Canadians don’t realize that they can pay lower taxes all year long. To reduce your source deductions, you use Form 1213, titled “Request to Reduce Tax Deductions at Source”. Some examples of expenses which qualify are:
- RRSP deductions made throughout the year or from a lump sum such as a bonus
- Child care expenses
- Alimony or support payments to an ex-spouse
- Several others such as: employment expenses, interest expenses and carrying charges on investment loans, charitable donations, medical expenses and rental losses.
If you have such expenses and want to apply for lower withholding tax at your workplace, submit Form T1213 to the Client Services Division of your tax services office along with the supporting documents. The CRA will send you a written notice within eight weeks indicating whether the request was approved or not. It will also notify your employer of the amount by which taxes deducted at source can be reduced, and send a copy of this letter to you.
One final note: before submitting, be sure that you have filed your income tax returns for past 2 years and paid all amounts owing in full.
Imagine you had $100 or $200 extra in your pocket all year long. You could use it to pay off debt faster, get a life insurance or critical illness insurance policy, make contributions to your TFSA, or save it up for your annual holiday so that you don’t have to use a credit card for those expenses. They are all good ideas. Contact me to design your personal Cash Flow Plan and help you decide what works best for you. I am one of a select few Canadian Financial Advisors who have the designation as a Certified Cash Flow Specialist™.
This link will take you to a calculator to figure out monthly payment plans for credit cards and other debts: https://www.getsmarteraboutmoney.ca/calculators/pay-off-credit-cards-debt/
What if you had an extra $10,000? Here’s an interesting graphic showing how people from different generations say they would use such a lump sum of money: