It’s great to get a tax refund – but it could be even better for your long-term financial health if you didn’t get one.
You see, that’s your money you’re getting back – overpaid taxes the government has had for its use interest-free. Money that could have been working for you throughout the year.
Delete that refund, improve your tax planning, keep more of your money, and enhance your financial future with these tips:
• Boost your paycheque by reducing the amount of tax withheld and invest the money for your own benefit
Each pay period, a portion of your pay is sent to the Canada Revenue Agency (CRA) to cover your estimated year-end taxes. If you got a refund, it’s likely because the withheld amount is excessive. You can apply to have it reduced by having your employer complete a Personal Tax Credit Return form (TD1) that updates all the deductions and credits you claim and more accurately reflects your current circumstances. For example, you may now be eligible for further child care expense deductions or for spousal maintenance that weren’t including on the TD1 form that was filed when you were first hired.
• Get quarterly tax installments in on time
If you are required to make tax installments (due on the 15th of March, June, September and December) get them in on time to avoid penalties and interest. If you think your income will be lower next year, check with your accountant about reducing those payments.
• Get an early RRSP deduction
An RRSP contribution often results in a tax refund. But when you make your contribution earlier in the year, you can apply to the CRA for a Letter of Authority that will permit your employer to reduce your paycheque withholding taxes based on the amount of your RRSP contribution. If you make RRSP contributions through payroll deductions, you don’t even need a Letter of Authority. Simply ask your employer to adjust your tax withheld to reflect your RRSP payroll contribution.
There are lots of other ways to get your money working for you. Your professional adviser can help you make the best tax planning and investment decisions for your unique situation.
J. Kevin Dobbelsteyn is a certified financial planner with Investors Group Financial Services Inc.. His column appears every Wednesday.
