Posted by Tim Stobbs on March 14, 2012
You read that title correctly: yes, I do like to owe at tax time, even if I actually don’t plan for it. You see I actually plan to get a close to zero refund as I can with my tax planning. So I fill out my TD1 forms, calculate my RRSP contributions and guess a little at the year ahead in order to get no tax refund or owe anything. Yet as you are likely aware life never works out that way.
So owing tax at the end of the year is a good sign to me as that means I earned more than I was guessing at the start of the year. While yes that does mean I end up having to consider paying a lump sum payment after I file my taxes I really don’t mind for the most part. After all I usually keep some money in saving to cover off this issue if I start to notice that I’m earning more than I would have guessed. Actually in late 2011 I made an extra lump sum contribution to my wife’s RRSP since I noticed I was doing much better on income than I thought I would.
I used to tax plan like most people and be very conservative on my estimates and would often get a refund at the end of the year. Then it occurred to me that I was giving the government an interest free loan of ‘my money‘ ever year that happened. So I decided to change my plan and aim for the zero refund.
I would caution that aiming for a zero refund in general takes more work. After all I often have to change my TD1 form at work in order to adjust for any changes that will occur in the year ahead. I also intentionally keep my taxes taken off my second job low in order to give me a bigger cash flow during the year which makes saving in our RRSPs easier. By the way, in case you were not aware of this fact the easiest way in the world to owe taxes is to have more than one job, since each job only assumes you only work for them you never get enough tax taken off at the second job. (In technical terms what happens is both work places assume you can use your basic tax deduction, when in fact you can only claim that once.) In order to compensate for this you either have to ask for extra tax be taken off on your TD1 form or contribute most of that second income to RRSPs. I personally go with the second option as saving is easier with a larger cash flow during the year.
How do you plan for you taxes? Do you like to owe money or get a small refund? Also can you tell I’m getting ready to do my taxes since this has been on my mind lately?
Posted by Dave on August 16, 2011
This is a guest post by Dave, who is also looking to retire no later than 45, but unlike Tim has no kids and doesn’t want any. Dave is from Ontario and is working towards his CGA certification.
Over the past few years, I would have to say that my fiscal and political views have definitely taken on a more libertarian flavour. I see waste and inefficiency in government that just makes me angry. We have people in office that don’t seem to understand (in my opinion) that running deficit budgets for years at a time is probably not the best way to do things, especially since they leave the repayment of the accumulated debt to the next generation or next party to get into office who starts the whole thing over again…..
But I digress (please read the disclaimer on the bottom far right sidebar, my views probably don’t reflect Tim’s at all, who owns the blog) even though I don’t agree with how most of the revenue is brought in, I will not (purposefully, I may by accident) cheat on my taxes. In the several taxation courses I have taken on-route to a CGA designation, I have realized that it really just isn’t worth it.
There are many, many ways that an individual can cheat on their taxes – they can decrease their level of income, Increase the amount of expenses claimed, a person can hold onto money that should have been remitted as sales tax, or claim credits that they shouldn’t have. An interesting site (if you’re into that kind of thing) to read about tax convictions on Canada Revenue Agency’s convictions page,which gives details of larger convictions and the reasons why they occurred.
I have come to realize that if I wish to live in this country (which I do), I need follow the tax laws as prescribed. It’s not something I enjoy doing by any means, but rather then grumble about it, or try to cheat to get around paying them, I attempt to pay what I’m supposed to and keep good enough records that if I’m questioned on anything I would be able to explain what I did. I never want to be in a situation where I have the CRA auditing me over my past 5 year’s worth of filings and knowing that I owe a substantial amount of money. From a personal finance perspective, this would probably clean out my savings and set back my plans significantly, which is far from ideal.
What I don’t think most people realize (especially those cheating on their taxes) is that they have a choice – if they don’t agree with how things are working here, they can go somewhere else with a more favourable system. Most people will not, and will continue to grumble and cheat and then wonder why they have to pay $84,547 in taxes and penalties (an example from the CRA site). I know of several people who actively sneer at the government and continuously cheat on their taxes – I just wouldn’t want to take the risk a few years down the road via a random audit. I figure if they don’t like the way things are running here, nobody is forcing these cheaters to stay in Canada.
What’s your stance on taxes? How do you try to minimize the amount paid? Would you consider moving due to your country’s taxes?
Posted by Tim Stobbs on March 23, 2011
Typically I do a little coverage on the federal budget pointing out either the main things that will affect your bottom line or some of the little covered items. This year I’m taking a different stance since all three opposition parties have indicated that they are not supporting the budget. Thus this budget will never go into law as it current stands and we are just a debate and vote away from an election. Yet at the same time there is this interesting idea that this budget could also be the Conservative election platform. So what is a poor blogger to do?
Well that is going to be easy. Keep my nose out of it. I don’t have a clue what the other parties will be offering in an election platform, so there isn’t much point worrying about comparing something to nothing for now. Instead I will point out an important piece of advice…if you don’t like how things are going, go vote. If you don’t understand something, find out and then go vote. If you don’t like any of the options, pick your least offensive and go vote. Why?
Because in a democracy a vote is basically your only weapon of choice. It’s a one chance every four years once in awhile to voice what matters most to you. Do you favour tax cuts to corporations or social programs or debt reduction? Have your say and remember to vote. Now I will put my little soap box back in the corner of the room.