Don’t Lend The Government Your Tax Refund

by Tax Guy - Burlington Accountant on February 13, 2010 Print This Post Print This Post

If you are making regular contributions to an RRSP and are receiving tax refunds every year, you are lending the government money at 0% interest! Rather than lend the government money for free, why not invest it instead?

If you are making regular personal contributions to an RRSP, have childcare expenses, make spousal (alimony) payments, or have other deductions, then too much income tax is being deducted from your paycheque.

Now you can’t just ask your employer to reduce the amount of tax withheld! Instead you need to obtain a letter of authorization from your local tax services office. To obtain this letter, you need to complete CRA form T1213 Request to Reduce Tax Deductions at Source and send it to your local tax services office. You will need to support your request.

If you’re self-employed the situation is a little different because you may be required to pay your tax by instalments. If you are using the current calculation method and the instalment payments are too low, you may be charged interest and penalties. For more information, see the CRA Guide: P110 – Paying Your Income Tax by Instalments.

About The Tax Guy...

Dean Paley CGA CFP is a Burlington accountant and financial planner who services individuals and business owners locally, nationally and internationally. Dean has appeared in the National Post, Toronto Star and Metro News.

To find out more, visit Dean's website Dean Paley CGA CFP or connect via Twitter @DeanPaleyCGACFP.

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