Comments on: Tax Refunds are Not Your Friend

By: Oscar Hathway

Oscar Hathway — Wed, 16 Jun 2010 01:06:11 +0000

thanks to you for this cool entry.

By: Oswaldo Gaymon

Oswaldo Gaymon — Tue, 16 Feb 2010 05:57:53 +0000

You know it’s posts like this that can easily spur people on to concieve about this. I found it to be awful informative. I will be coming back here for more reading as I much enjoyed this!

By: Jane

Jane — Fri, 20 Feb 2009 14:55:46 +0000

My husband and I get a large tax refund each year $5000 plus because we are able to claim many expenses. This money is used to pay car and house insurance for the year, property taxes etc. If we were to pay less tax and get the money weekly it would still be used to pay the same things…not having monthly payments for these things makes my life much more pleasant. There’s a fee to have monthly payments for insurance so any interest is eaten up by the fee. What we don’t do is buy frivolous items with our pseudo windfall.

By: Lauren

Lauren — Wed, 18 Feb 2009 14:35:11 +0000

Michelle, CRA just picks on people sometimes though. It all started when I rented from a slumlord: CRA wanted my rent receipts, which my ex-landlord wouldn’t provide me. When I called to say he wouldn’t give me the receipt, CRA demanded that I get copies of every single check for the year, despite that I didn’t have the $95 in fees (“Better $95 than the $300 we want, right?” I don’t know, you could have helped me by sending a letter saying it is law that he must give me my receipt). The CRA lady let it slip that it was about him, so I spoke with other tenants. All of us whined that CRA then asked for our rent receipts for 4 years despite that every year we proved every penny.

Finally, I had a year off of their scruntiny. My T4 gets lost in the mail, the duplicates aren’t arriving and the deadline looms, so I pull out my old paystubs and calculate the numbers myself. A few stubs were missing, so I estimated based on previous stubs and turned out to be off by >$10 on 3 lines. I filed a T1 Adjustment and sent in my math and the receipt, thinking it should be clear by now that I endeavour to be accurate. They pulled my file again and I had to prove everything they don’t automatically get a receipt for: public transportation costs, rent, disability equipment purchases… Back in the loop again for a few years.

The lesson: once you have been pulled, whether for suspicion or as a random sample, you will be forced to jump through their hoops for 3-4 years of having your return matching to the penny of what you can prove (that countdown doesn’t start until your numbers are exactly right- mine have been, friends have not). Even if you’ve gone through this every year (except one) for your entire tax-filing life and always receive that letter at the end saying no adjustments we made, you will be stuck in that loop for years.

At least since I get pulled every year, my records are immaculate. For example, I use to never ask for a rent receipt unless I needed it (why put them through the paperwork when you have cheques an they’re honest), but now I asked for a receipt every year, December 15th, like clockwork.

By: Susan

Susan — Sun, 21 Dec 2008 03:17:20 +0000

Michelle, You say you were reassessed, which means the expenses were disallowed. Moving costs are almost always reviewed, but they don’t reassess right away. They first request that you send the receipts. Did you do this? I am an accountant, and these requests always come to me rather than to the taxpayer. Is this your case? Or did the request go to the accountant? Were receipts sent in?

Susan

By: psychsarah

psychsarah — Wed, 17 Dec 2008 15:15:04 +0000

Last year the government reassesed my taxes: they thought they ought to tax my big government granted graduate scholarship because I wasn’t a student-sound absurd? How many people who aren’t students get big chunks of money from competitve scholarship programs? But I digress… Once I established that I was, in fact, a student, they reassessed again and sent me a cheque for an extra #350 wtih interest! Although it was a huge hassle, I enjoyed the end result!

By: Melaniesd

Melaniesd — Wed, 17 Dec 2008 12:36:48 +0000

Gail, do you secretly have it out for Scotiabank?? lol! You seem to *dislike* the ideas they have… : )

Great post – as usual. Thanks for the info!

By: Gail says...

Gail says... — Wed, 17 Dec 2008 10:38:16 +0000

Re: I’d rather pay too much than too little… Don’t be a dope! Stick the difference in a savings account and if you owe use that money to pay the gvt. If you don’t use the money to boost your savings. In the mean time you’ll have earned some interest on it.

Re: the best time to do it. Oct/Nov is the best time so you can have to instructions in place by January for the new tax year. If you haven’t done it by then NOW is the best time to stop overpaying.

Michelle W: I’m not a U.S. tax person, but from what I see at the IRS, all you have to do is go fill out an updated W-4 for your employer.

By: Michelle W

Michelle W — Tue, 16 Dec 2008 23:39:21 +0000

Hi. I’m in the US and wanted to know what is the equivalent form of the T1213 in the United States.

By: Saver Queen

Saver Queen — Tue, 16 Dec 2008 22:11:12 +0000

Michelle, what a downer! I hope they made a mistake and give it back to you quickly. Last year I got a notice as well – their mistake – and they reissued me a cheque a few months later when they realized their error (no interest of course.)

By: Michelle

Michelle — Tue, 16 Dec 2008 20:33:44 +0000

An even worse enemy than the tax refund – the tax reassessment. We had our moving expenses audited this year, when I got the notice I was not concerned as we had hired an accountant to do our taxes rather than do them ourselves as we usually do.
I am glad we had the emergency fund to pay the $1600 that Revenue Canada would like to have “immediately please”. I would have rather transferred the $1600 into a vacation fund or our house fund though!

By: Tracy J

Tracy J — Tue, 16 Dec 2008 20:14:35 +0000

Being self-employed I PAY every year, and being an employee my husband gets a refund… it almost always balances out. The funny part is my husband is always annoyed at how LOW his refund is! I have tried explaining that the lower the better, but he really likes that “reward” for overpaying all year long, not sure why.
Gail, I notice you usually tell the TDDUP couples to apply their tax refunds to their long-term savings, theoretically they shouldn’t have any refund though, right?

By: How to Live in Canada

How to Live in Canada — Tue, 16 Dec 2008 19:46:02 +0000

Gail, you said that the best month to fill the form is October or November. We’re almost in January 2009. Is this a good time to request, or should we wait until next year to start?

Thanks!

By: Amber

Amber — Tue, 16 Dec 2008 18:12:37 +0000

My employer offers a great program for RRSPs. You can contribute automatically out of your paycheque, and then you don’t have to pay tax on it. It means you don’t get the year-end refund, but as Gail says you’re not overpaying on taxes. Plus, because no tax is being taken off, it means when you put $100 in you’re only losing $60-$70 from your net pay, so you can save more. I love-love-love this plan!

By: Rebecca

Rebecca — Tue, 16 Dec 2008 17:56:34 +0000

“I’d rather err on the side of caution and get a refund, than be wrong and end up having to pay tax unexpectedly at years end.”

Agreed. I’ve had that experience before, and it is not fun.