Are You Overpaying Your Withholding Taxes?

Each year Canadians make an interest-free loan to Canada Custom and Revenue Agency (CCRA) of about 12 Billion dollars!

Are you one of them?
Chances are that you if you file an Income Tax return and receive a refund – then you are.

CCRA collects about $100 billion plus each year through the Income Tax.

If they have to give 12 billion dollars back in refunds then that means that 12% of that money that they collected was not theirs to begin with.

Remember a refund is not a gift from the government; it is a return of your own money!

So how can you reduce your withholding taxes?

Here are two strategies:

First, review your TD1 form.
This is a form that you filed with your employer when you were hired for your job.

Outdated data that could affect the amount of withholding taxes:
If for example you were single and are now married with children, this one change alone could provide you with a significant reduction at source.
So, investigate and make the corrections if applicable.

Second, whether you pay source withholdings (as with an employer) or in installments (as in the case of self-employment or retired), you can apply to your local CCRA office to allow you to reduce your withholding tax for deductions not covered by the TD1 form.
Examples of these deductions are: RRSP contributions, medical expenses, charitable contributions.
Request a waiver form from CCRA and give it to your employer so that he/she will be released from the responsibility of reducing your payroll tax and you will end up with a bigger take home pay cheque.

These two strategies alone could allow you to have your tax savings now to spend and INVEST as you see fit.

Remember a refund is nothing more than the return of your own money!

This one adjustment in your finances could help you to pay off your mortgage years sooner or retire much earlier and with more financial security and independence. nn