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Tuesday, April 25, 2017

My Tax Refund is WHAT?!?

Posted by Tim Stobbs on March 9, 2007

During the last week I have been filling in some of my tax information into QuickTax 2006 to get an idea of what my tax refund will look like. I am still missing one of my T4 slips from my previously employer, but I used my last pay stub to build a fairly accurate estimate. Then I entered in some of my basic deductions like RRSP’s and a few T5 and T3 forms I already have.

So far I’m almost at a refund of $5000 and I still have deductions for my move and partial northern living allowance that I can claim for last year to enter in. So I’m currently looking at the single biggest tax refund I have ever gotten.

How did this happen? Well a combination of weird events. First off in Jan 2006 I got a BIG bonus cheque which got taxed to hell. Then I maxed out my CPP contributions for the year at my old job just before moving to my current job. So my CPP contributions started all over again and I ended up almost maxing out again.

Then the icing on the cake is I forgot my wife still had some carry forward credits from last year which should easily drop her under the basic deduction and result in no tax payable.

So the government ripped me off and took far to much of my money. So now I’m waiting for my tax forms to roll and and Netfile to come back up so I can get money back. To summarize today’s lesson is don’t let the government hang on to your money and if you can fill out any form you can find to legally reduce your tax bill at the source.

Comments

8 Responses to “My Tax Refund is WHAT?!?”
  1. George says:

    Here’s the form that very few people use, but is remarkably useful to keep money out of the government’s hands: Form T1213 (do a google search for it or pull it up on the CRA web site).

    This form allows you to request that CRA permit your employer to reduce the amount of income tax they take off of your paycheques. They will allow this if you can demonstrate that you’re eligible for certain recurring deductions that will reduce your tax bill at the end of the year – the big ones for me are child care expenses and RRSP contributions.

    Essentially what this does is let you trade in a big tax refund for more take-home pay on a regular basis. Instead of paying extra tax and getting refunded, you’ll pay less tax on an ongoing basis. This frees up cash to use on a regular investing program.

    You need to fill out the form and send it to CRA each year. If approved, they’ll send you a letter that you provide to your employer, who in turn reduces the tax taken off of your pay. It’s a good idea to send in the form by October or November, so that you get the letter back before the start of the next calendar year.

  2. Margot Bai says:

    I concur with George. My family has been filling out the T1213 form for the past 5 years or so. The great thing is that by increasing your regular take home pay makes those RRSP contributions more manageable.

    Planned charitable contributions are another qualifying expense to reduce tax-withholding.

    The first time we filled out the form, CRA came back to us and asked us to “prove” our planned contributions. We replied that we had set up regular monthly contribution plans for RRSPs and charitable donations. That combined with what we had done in previous years was sufficient.

    The best time to send in the form to CRA for approval is November, but don’t let that stop you. You can fill out and send in the form anytime and CRA will provide instructions for your employer to adjust your paycheque for the remainder of the year so that you can expect very little tax owing or refund at tax time.

  3. Big Cajun Man says:

    Funny, I have been raling about CCRA keeping my money over at my blog as well. I use the T1213 to lower my taxes because of my donations to my church and such as well.

    The other important thing to do is if your wife becomes unemployed or stops working, make sure she becomes a “write off” for you as well with your employer (that’s another $1000 you’d want to keep over the year).

  4. Canadian Dream says:

    Everyone,

    Thanks for the detailed advice on how to use the T1213. I may have to try that for next year.

    CD

  5. George says:

    CD, there’s no need to wait until next year to send in the T1213 form. You can send it in right now – as soon as you get the approval letter from CRA you can get your employer to reduce the tax withholding from your pay for the remainder of 2007.

  6. Canadian Dream says:

    George,

    You are right. I should do that now.

    Thanks,
    CD

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