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[OP]
Jr. Member
Nov 30, 2011
103 posts
10 upvotes
SCARBOROUGH

Reducing tax owing

I know this is a very general question, with little upfront info (feel free to ask about details). for my 2018 taxes i owed $2200.
I have a high salary. I contribute a little with employer matching to RRSPs. my wife is on mat leave, so her salary/income is only EI.
we donate to a charity ($1500/yr).
i'm trying to find ways to reduce tax owing for my 2019 returns. is there something else people use?
should i be using any other methods.
I have a basic accountant, the files my returns.
17 replies
Deal Addict
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Mar 9, 2012
3462 posts
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Kitchener
surfer007 wrote: I know this is a very general question, with little upfront info (feel free to ask about details). for my 2018 taxes i owed $2200.
I have a high salary. I contribute a little with employer matching to RRSPs. my wife is on mat leave, so her salary/income is only EI.
we donate to a charity ($1500/yr).
i'm trying to find ways to reduce tax owing for my 2019 returns. is there something else people use?
should i be using any other methods.
I have a basic accountant, the files my returns.
Sounds like your TD1 wasn't filled out incorrectly. It really looks like your claim code includes the wife, which would assume $0 income. Your accountant should have been able to figure this out. A correctly filled out TD1, with RRSP and charity donations, you should be getting something back, not owing.
Why can't we all just get along?
[OP]
Jr. Member
Nov 30, 2011
103 posts
10 upvotes
SCARBOROUGH
Thanks, I figured i should be getting something back. I'll check the TD1 thing you mentioned.
My wife went on mat leave in august, but she was working up until then. Her net income was 60k

jeff1970 wrote: Sounds like your TD1 wasn't filled out incorrectly. It really looks like your claim code includes the wife, which would assume $0 income. Your accountant should have been able to figure this out. A correctly filled out TD1, with RRSP and charity donations, you should be getting something back, not owing.
Deal Addict
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Dec 24, 2007
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surfer007 wrote: I contribute a little with employer matching to RRSPs.
What is a little? If your employer matches your RRSP contribution, you should contribute the maximum allowed, if you are not doing it already. As a T4 earner, RRSPs are the only "tax shelter" left that can be used to reduce your income materially.
Deal Addict
Jan 19, 2017
4089 posts
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surfer007 wrote: I know this is a very general question, with little upfront info (feel free to ask about details). for my 2018 taxes i owed $2200.
I have a high salary. I contribute a little with employer matching to RRSPs. my wife is on mat leave, so her salary/income is only EI.
we donate to a charity ($1500/yr).
i'm trying to find ways to reduce tax owing for my 2019 returns. is there something else people use?
should i be using any other methods.
I have a basic accountant, the files my returns.
If you mean to reduce tax deducted from your pay cheque, yes the TD1 form will help. But the end result is the same when you file your tax return. Either more tax is deducted from your pay cheque and more refund after filing tax return or less tax deducted from pay cheque and less refund at tax filing time.
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Mar 31, 2009
1176 posts
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There is no free ride or trick to saving tax as a salary earning employee. In my opinion, the best situation is to actually owe $2999 every year because that is the maximum amount you can owe before CRA could ask you to make installments. If you owe $2999 and never have to make installments, it means you have some of what you would owe the government, in your pocket, all the time. Pay your balance by April 30th every year and it means basically the government is constantly giving you an interest free loan to do with whatever you choose.

Donations reduce balance owing, but it's not like you're ahead or anything. The amount you 'save' on tax is far less than the amount the donation cost you out of pocket. (which is obvious, but sometimes I feel like people don't notice or realize that..) Same with most other 'tax savings'. It's only truly beneficial to you if it's money you would have used that way anyway and if you're burning that money anyway you may as well get the tax deduction from it. But make no mistake, you're worse off financially overall and would have been better off (yourself) not making donations and owing more instead.

The exception being RRSP contributions. But I believe that if you have an employer matched RRSP contribution type of thing, your TD1 may be filled out so that they are actually deducting less tax off of your pay in the first place, to reflect the expected tax deduction from the contribution. Therefore, it won't actually help or hinder your refund or balance owing as much as you'd expect. Heck, to make a $2000 difference (ie to make it so that you would have been near flat instead of owing) it would have required probably a $5000 or $10,000 RRSP contribution depending on your salary (tax bracket). In that case you're better off financially overall, but you're not going to feel richer by making that balance owing go away. And those numbers are assuming that your TD1 isn't being adjusted based on the employer contribution or anything like that. Which may or may not happen.

Regardless, if you're a high salary individual you should be maxing out your RRSP contributions and probably contributing to a spousal RRSP if you're expecting to stay married. Assuming your spouse makes less than you and is in a lower tax bracket, contributions to a spousal RRSP really make the most sense. But this is more-so about the long term retirement strategy than specifically chasing a refund situation.

If you truly just don't want a balance owing, your best bet is to tell your employer you want additional tax taken off each pay period. That can be requested and done.. But in my opinion, I wouldn't do that. In my opinion, owing $2200 means you had a free government loan. Do your taxes on time, pay them on time, be happy. Only get annoyed if your balance owing is over $3000 because than you'll have to pay installments, and that is not ideal since you then have to remember to pay the installments and it will negate any free loan you otherwise would have received and potentially put you into a refund situation all over again. Refund situations means you gave the government a free loan. Do you like giving the government a free loan, or do you prefer getting a free loan from the government? That's why I consider refunds to be bad and balance owing to be good.
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Aug 30, 2011
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Ottawa
^ good answer from unknownone. Although I don't need the info myself, it is appreciated when fellow RFDers take the time for such a detailed reply.
Deal Fanatic
Oct 7, 2007
8092 posts
4068 upvotes
I COMPLETELY agree with unknownone on this:
If you truly just don't want a balance owing, your best bet is to tell your employer you want additional tax taken off each pay period. That can be requested and done.. But in my opinion, I wouldn't do that. In my opinion, owing $2200 means you had a free government loan. Do your taxes on time, pay them on time, be happy. Only get annoyed if your balance owing is over $3000 because than you'll have to pay installments, and that is not ideal since you then have to remember to pay the installments and it will negate any free loan you otherwise would have received and potentially put you into a refund situation all over again. Refund situations means you gave the government a free loan. Do you like giving the government a free loan, or do you prefer getting a free loan from the government? That's why I consider refunds to be bad and balance owing to be good.
It is interesting how we are trained to think that getting a tax refund is a "good" thing when really it isn't. It is actually quite the opposite and unknownone does a great job of explaining it above.

BUT if what you are asking is how to reduce the amount of tax surprise you had of $2200 to something more manageable, I would recommend asking your payroll department to hold more tax off of your pay cheque. You could start by having them withhold $2200 spread over 24 paycheques to start assuming you get paid bi-monthly. If you overpay, don't worry, you will get it back when you do your tax return but this way you won't be faced with having to come up with so much money all at once.

If you are savvy at math, you could also try to forecast your taxes owing using the tax calculator at taxtips.ca. I use the tax calculators here all the time as they help me forecast my tax bill accordingly.

taxtips.
Deal Fanatic
Sep 23, 2007
5061 posts
1155 upvotes
Some things come to mind in no particular order.

-You having first child? I believe there exists some child benefits on the tax form

-While you are at it, glance at the tax form and look at what kind of things you can get credits for or be deducted from taxable income. It may change year to year. Some accountants don't help you claim credits because they get paid the same. Or sometimes they don't know what they don't know. You know your financial situation the best...like back a couple years we still had tax credit for public transit passes. An accountant wouldn't know unless he/she deliberately ask, or you know to bring up the topic. Moving expense is another common one. There's also professional fees like CPA membership or your Engineering membership.

-Get a tax software to do it. I use Studio Tax which is free. Try filling out a spousal joint return and see if you get better tax results. I believe most likely it would

-The maximum RRSP contribution room in 2019 is 26k something. Are you close to this number? Expect this number to go up a little each year. For the average person, RRSP contribution is the main way to minimize personal taxes because every $1 you contribute is reducing your income by $1. RRSP makes sense for the average person where they are expected to have lower earned income in their retirement years.

-Do you have other incomes? For capital gains, remember that you can carry forward losses and apply them. If you have business income, you want to make sure you report all relevant business expenses.

As others said, if your only income is a regular job, then your payroll department's calculated deductions would generally be pretty close such that you shouldn't have a large gap during tax filing. If you have incomes where there is no source deduction, like capital gains, interests, dividends, business (sole proprietorship), rental etc, then it is quite natural that you have tax owing. The later you pay such taxes, the better.
Jr. Member
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Mar 14, 2017
169 posts
71 upvotes
Change your employer-employee relationship to contractor-client relationship. Winking Face
[OP]
Jr. Member
Nov 30, 2011
103 posts
10 upvotes
SCARBOROUGH
yes, i match 3% from the employer but thats about it. I'm no where near my limit. I'm trying to find out what other ways there to reduce it.
I have a giant mortgage ( i live in the GTA). and a LOC that i'm paying down. so there is very little extra to put away or save
WetCoastGuy wrote: What is a little? If your employer matches your RRSP contribution, you should contribute the maximum allowed, if you are not doing it already. As a T4 earner, RRSPs are the only "tax shelter" left that can be used to reduce your income materially.
[OP]
Jr. Member
Nov 30, 2011
103 posts
10 upvotes
SCARBOROUGH
I agreed, i did need the info, and i really appreciate the response

OttawaGardener wrote: ^ good answer from unknownone. Although I don't need the info myself, it is appreciated when fellow RFDers take the time for such a detailed reply.
[OP]
Jr. Member
Nov 30, 2011
103 posts
10 upvotes
SCARBOROUGH
Thanks for all the info, I will definitely talk to an accountant about this. appreciate the time for the response, good to know people are still willing to lend advice
unknownone wrote: There is no free ride or trick to saving tax as a salary earning employee. In my opinion, the best situation is to actually owe $2999 every year because that is the maximum amount you can owe before CRA could ask you to make installments. If you owe $2999 and never have to make installments, it means you have some of what you would owe the government, in your pocket, all the time. Pay your balance by April 30th every year and it means basically the government is constantly giving you an interest free loan to do with whatever you choose.

Donations reduce balance owing, but it's not like you're ahead or anything. The amount you 'save' on tax is far less than the amount the donation cost you out of pocket. (which is obvious, but sometimes I feel like people don't notice or realize that..) Same with most other 'tax savings'. It's only truly beneficial to you if it's money you would have used that way anyway and if you're burning that money anyway you may as well get the tax deduction from it. But make no mistake, you're worse off financially overall and would have been better off (yourself) not making donations and owing more instead.

The exception being RRSP contributions. But I believe that if you have an employer matched RRSP contribution type of thing, your TD1 may be filled out so that they are actually deducting less tax off of your pay in the first place, to reflect the expected tax deduction from the contribution. Therefore, it won't actually help or hinder your refund or balance owing as much as you'd expect. Heck, to make a $2000 difference (ie to make it so that you would have been near flat instead of owing) it would have required probably a $5000 or $10,000 RRSP contribution depending on your salary (tax bracket). In that case you're better off financially overall, but you're not going to feel richer by making that balance owing go away. And those numbers are assuming that your TD1 isn't being adjusted based on the employer contribution or anything like that. Which may or may not happen.

Regardless, if you're a high salary individual you should be maxing out your RRSP contributions and probably contributing to a spousal RRSP if you're expecting to stay married. Assuming your spouse makes less than you and is in a lower tax bracket, contributions to a spousal RRSP really make the most sense. But this is more-so about the long term retirement strategy than specifically chasing a refund situation.

If you truly just don't want a balance owing, your best bet is to tell your employer you want additional tax taken off each pay period. That can be requested and done.. But in my opinion, I wouldn't do that. In my opinion, owing $2200 means you had a free government loan. Do your taxes on time, pay them on time, be happy. Only get annoyed if your balance owing is over $3000 because than you'll have to pay installments, and that is not ideal since you then have to remember to pay the installments and it will negate any free loan you otherwise would have received and potentially put you into a refund situation all over again. Refund situations means you gave the government a free loan. Do you like giving the government a free loan, or do you prefer getting a free loan from the government? That's why I consider refunds to be bad and balance owing to be good.
[OP]
Jr. Member
Nov 30, 2011
103 posts
10 upvotes
SCARBOROUGH
So this is something i've been curious about. I definitely don't have 26k to put in RRSPS, but should i be getting a RSP loan to put in the RRSP.
If i put it in to y RRSP, can i pull out ?

BananaHunter wrote:

-The maximum RRSP contribution room in 2019 is 26k something. Are you close to this number? Expect this number to go up a little each year. For the average person, RRSP contribution is the main way to minimize personal taxes because every $1 you contribute is reducing your income by $1. RRSP makes sense for the average person where they are expected to have lower earned income in their retirement years.

Deal Fanatic
Apr 5, 2016
5048 posts
3577 upvotes
Calgary/Vancouver
surfer007 wrote: So this is something i've been curious about. I definitely don't have 26k to put in RRSPS, but should i be getting a RSP loan to put in the RRSP.
If i put it in to y RRSP, can i pull out ?
Only do an RRSP loan if you can actually budget it into your cash flow. No point doing it if you're struggling to pay it off. You also want to at least make more than prime rate (typical RRSP loan rate) to make it beneficial.

You can pull out RRSP but keep in mind, it'll be taxed at your income rate.
Current Fido and Rogers customer.
Ex Koodo customer.
Deal Addict
Aug 30, 2011
3459 posts
1219 upvotes
Ottawa
surfer007 wrote: So this is something i've been curious about. I definitely don't have 26k to put in RRSPS, but should i be getting a RSP loan to put in the RRSP.
If i put it in to y RRSP, can i pull out ?
Do not just put $26,000 into your RRSP. The amount you can put into RRSPs is specific to your own situation, you only look at the maximum if you otherwise qualify. Penalties are high if you overcontribute.

From the CRA website...
How is your RRSP deduction limit determined?
The Canada Revenue Agency generally calculates your RRSP deduction limit as follows:

The lesser of
- 18% of your earned income in the previous year, and
- the annual RRSP limit
Minus
- your pension adjustments (PA)
- your past service pension adjustments (PSPA)
Plus
- your pension adjustment reversals (PAR), and
- your unused RRSP, PRPP, or SPP contributions at the end of the previous year

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