Personal Finance

Reduce/withhold the income tax deduction from my paycheck

  • Last Updated:
  • Dec 16th, 2020 12:18 pm
[OP]
Member
Nov 3, 2015
254 posts
49 upvotes
Clarkson, ON

Reduce/withhold the income tax deduction from my paycheck

Is there a way for me to reduce the amount of provincial and federal income tax deducted from my biweekly pay?

Basically instead of it being deducted when I get my pay, I would like to pay this amount at the end of the year (Apr of the following year) when doing my taxes. This way I have the money in hand and can choose to invest it (even if for short term gains) rather than it sitting with the government.

If this is possible, do I need to pay an interest since the deductions were paid later on?

If this is an absurd question please go easy on me, I don't know much about taxes but was hoping to learn more.

Thanks.
14 replies
Member
Oct 28, 2013
395 posts
326 upvotes
Toronto
I reduced my payroll tax deductions many years ago when I had 3 kids in daycare and a lot of deductions. I don't know if you can withhold ALL your taxes though. I was just aiming to get my net return to be 0.

Did a quick google and there's some info on the web.
https://turbotax.intuit.ca/tips/employe ... olding-244

N
[OP]
Member
Nov 3, 2015
254 posts
49 upvotes
Clarkson, ON
Thansk @queentasha.

I found forms here https://www.canada.ca/en/revenue-agency ... t1213.html. But I don't quite understand this. I figured I would need to ask my employer to reduce the tax deductions, but these forms are to be submitted to the govt.

Because I'm not looking to pay less income tax. I just want to hold back part (or as much as I can) of the amount, that is deducted from my payroll.
Deal Addict
Jun 12, 2008
1168 posts
638 upvotes
Ripley
fractall wrote: Thansk @queentasha.

I found forms here https://www.canada.ca/en/revenue-agency ... t1213.html. But I don't quite understand this. I figured I would need to ask my employer to reduce the tax deductions, but these forms are to be submitted to the govt.

Because I'm not looking to pay less income tax. I just want to hold back part (or as much as I can) of the amount, that is deducted from my payroll.
Only for those categories on the form. If they do not apply to you, you cannot reduce your taxes taken off your paycheque. Even on the T1213 it is not your whole salary. Your employer has to legally submit your taxes/CPP/EI to the government on a monthly or quarterly basis.
Deal Guru
User avatar
Sep 1, 2005
12505 posts
7266 upvotes
Markham
fractall wrote: Is there a way for me to reduce the amount of provincial and federal income tax deducted from my biweekly pay?

Basically instead of it being deducted when I get my pay, I would like to pay this amount at the end of the year (Apr of the following year) when doing my taxes. This way I have the money in hand and can choose to invest it (even if for short term gains) rather than it sitting with the government.

If this is possible, do I need to pay an interest since the deductions were paid later on?

If this is an absurd question please go easy on me, I don't know much about taxes but was hoping to learn more.

Thanks.
Let me see....is the Gov't OK with you holding their money? and maybe you don't have later when you owe your taxes.... Hmmm.

Is it OK if your employer holds your pay till the end of the year....you know so they can invest it....hmmmm
We're all bozos on the bus until we find a way to express ourselves...

Failure is always an option...just not the preferred one!
Newbie
May 31, 2006
74 posts
28 upvotes
GTA
I did this for a couple of years.

I set up a recurring monthly contribution into my RRSP. Then I filled out the T1213 form (the one you found and linked to above). Sent it into the appropriate centre listed on the form. When I got the approval back, I gave that to my employer and they reduced my tax deductions.

This basically takes the tax refund I would have gotten in the following year and spread it out through the current year.

If you're a regular employee, I don't think you can reduce your tax deductions all the way to zero. But if you're self-employed independent contractor then your client wouldn't deduct taxes from your pay. You deal with the taxes yourself.
Sr. Member
Oct 14, 2012
683 posts
411 upvotes
Woodstock
Self-employed (and anyone else, retired people, independently wealthy people etc.) have to pre-pay their taxes by quarterly installments if they owe very much tax to be paid on April 30. I don't remember the exact amount, but I think installment payments are required the following year if you owe more than $3000 in tax when you file your return. If you ignore the installment instructions and owe too much again the next April 30 they will charge you a penalty.

CRA posts stuff on installment payments https://www.canada.ca/en/revenue-agency ... ments.html etc.

So I doubt that you can get too much less deducted at source by your employer simply so you can use the money until you pay it on April 30.
Deal Addict
Jan 19, 2017
4418 posts
2558 upvotes
You will be charged interest if you owe >$3000 when file your tax return.
[OP]
Member
Nov 3, 2015
254 posts
49 upvotes
Clarkson, ON
gr8dlr wrote: Let me see....is the Gov't OK with you holding their money? and maybe you don't have later when you owe your taxes.... Hmmm.

Is it OK if your employer holds your pay till the end of the year....you know so they can invest it....hmmmm
That is a good point. After all the tax is their money lol that we earn.
Jr. Member
May 31, 2017
198 posts
278 upvotes
gr8dlr wrote: Let me see....is the Gov't OK with you holding their money? and maybe you don't have later when you owe your taxes.... Hmmm.

Is it OK if your employer holds your pay till the end of the year....you know so they can invest it....hmmmm
You really think the money you earn is you "holding onto their money"?
You think it's an equivalent argument to imply that it's like an employer withholding pay because a government "earned" a portion of your paycheque?

It's no wonder we keep getting hosed on taxes and have people believing Trudeau saying "we won't raise taxes until the economy returns to normal" the SAME WEEK as he already announced tax increases...some people just think we're holding onto the governments money for them.
Deal Guru
User avatar
Sep 1, 2005
12505 posts
7266 upvotes
Markham
BatCountry wrote: You really think the money you earn is you "holding onto their money"?
You think it's an equivalent argument to imply that it's like an employer withholding pay because a government "earned" a portion of your paycheque?

It's no wonder we keep getting hosed on taxes and have people believing Trudeau saying "we won't raise taxes until the economy returns to normal" the SAME WEEK as he already announced tax increases...some people just think we're holding onto the governments money for them.
"Equivalence" is grey and relative depending on how you perceive and think of things. It's not black and/or white. My point was to illustrate that what OP may be perceived as reasonable can be looked at from a different angle.

Gov't supplies health care, education, the roads you drive on, they are and integral part of your life and everything around you. Everyday you work/earn money, you keep some and you give some to them via payroll deductions. Is it OK to not pay them as you work because you'll pay them later? What if they said we'll provide healthcare later? Consider that you can go into the hospital and incur $100,000 of cost and yet you haven't paid in $100,000 of taxes. If everyone was like OP, how does the Gov't function?

I don't like taxes, I don't like the way the Gov't wastes my money but I recognize the system has it's benefit and that benefit comes with a cost and if everyone held onto the "gov'ts money" we won't have the same benefits.
We're all bozos on the bus until we find a way to express ourselves...

Failure is always an option...just not the preferred one!
Deal Addict
Jan 21, 2018
4571 posts
4628 upvotes
Vancouver
The CRA doesn't want you to defer withholding taxes, because they don't trust you to be able to pay the tax later. They want their cut up front whenever you receive taxable income.

As noted above, if you have one of a few legitimate reasons why you are guaranteed to be getting a refund on excess tax at year end, you can declare it on a form given to your employer. If approved the amount of tax withheld will be reduced. But it's a hassle that has to be repeated every year, and for most people it's generally not worth it, especially with near-zero interest rates. Many employers don't want to be bothered with making a special case for individual employees.
Member
Nov 26, 2012
350 posts
305 upvotes
Toronto
fractall wrote: Thansk @queentasha.

I found forms here https://www.canada.ca/en/revenue-agency ... t1213.html. But I don't quite understand this. I figured I would need to ask my employer to reduce the tax deductions, but these forms are to be submitted to the govt.

Because I'm not looking to pay less income tax. I just want to hold back part (or as much as I can) of the amount, that is deducted from my payroll.
I used to be an admin and would get these forms. You have to fill it out, submit to admin/HR/payroll. They then enter it into the payroll system so it actually gets reduced and send the form to CRA as proof for why they are remitting less taxes than the standard remittance. These are the only reductions allowed. For most people, it is not a lot but some find it worthwhile.

You can't withold a material amount of income tax until you file your taxes. Filing is to reconcile and balance your tax account, it's not meant to be the main payment date. When you buy a item, you pay HST/GST/PST in the purchase transaction. You don't get to say, let me tally up my purchases at year end and send CRA a check for the sales tax. Income tax actually works the same way. When you earn the income/salary, you have to pay the income tax at the time the money was earned. Your employer simply facilitates this on your behalf on each paycheck and remits for you. CRA gives self-employed people a break by letting them do it quarterly.
Member
Apr 16, 2015
276 posts
369 upvotes
To summarize:
- If you are entitled to tax credits, you can reduce your payroll deductions so that your employer doesn't withhold too much (instead of waiting for a refund in April).
- But you can't reduce withholding to the point where you will owe alot of tax in April.
- For basic credits like tuition, disability, caregiver, etc. you just fill out a TD1 form (both the federal and provincial versions) and give this to your employer. This is very common and I believe it stays in effect year to year until you change it.
- If you have more unusual deductions or credits in a particular year (i.e. RRSP contributions, moving expenses, large medical expenses, etc.) you can complete the T1213 form you mentioned and send it to the CRA for approval. This must be done each year and contain supporting documents.

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