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I got a tax refund, Yay!

by Tim St Vincent

So you got a tax refund – Yay, Congratulations! Great news! Or is it?

Do you realize that getting a tax refund means that you have been overpaying your taxes? That the government has had your money all this time? No, they won’t be paying you interest for letting them use your money for the time that they have had it. Don’t expect a “thank you,” either.

Ask yourself what could you have done with that money if it had been in your hands instead of being with the Canada Revenue Agency and the Minister of Finance? You know those months when you were just a few dollars short? Where you couldn’t quite make ends meet and you skipped a payment or two because of it, or maybe you borrowed some money just to tide you over. Well maybe that wouldn’t have happened if you had had your money in your hands instead of it being in the government’s bank account.

If you find yourself in the situation where, year after year, you are getting a tax return, that may not be such a good thing. It may be better if you received almost nothing back! That would effectively mean that you would have control and access to all of your funds and the government would not have access to anything more than what you are supposed to pay.

How can you do this? How can you keep as much money in your hands for as long as possible? Fairly easily, simply go to your HR or payroll department and ask them to decrease the amount of money they are sending to the Canada Revenue Agency (CRA) by reducing your deductions at source. To accomplish this you will have to fill out CRA form T1213 and have CRA approve it then submit the approval to your HR/Payroll department for processing. This is generally fairly easy to do if you contribute to an RRSP and/or have a history of tax refunds, or can show a reasonable expectation of a tax refund in a given year. The forms and some structure around the request can be found here:

Now don’t go crazy! Prepaying your taxes is a good thing – overpaying your taxes isn’t. Before undergoing any changes, check with your financial planner, or if you don’t have one, then check with your bank representative for some guidance.

This all relates to things in the past; nothing you can do now to impact the taxes already paid, owed or refunded in the 2018 tax year. Act now though, and you may be able to improve your situation in 2019 so that you have more money available to pay your bills. But you must have self-control and a budget, otherwise you will likely spend the money from your improved cash flow on impulse purchases and then you are no further ahead. Plan now to improve the remainder of your 2019 and to improve your situation when you file your 2019 return in 2020.

Okay, so all this is great, but what should you do now with the tax refund you are about to get? That’s easy; jump into your time machine! “Huh?” you think, “I don’t have a time machine, what is this guy on about?” Yes, you do have a time machine; you just never realized it before. Money is your time machine. You can travel into the future by putting money into savings – because money in savings is money that we are going to spend in the future! You can take your time machine and travel in the past too! You do this by taking your money and paying down debt. Remember, debt is nothing more than money we have spent in the past but that we haven’t caught up to just yet!

We suggest that when you run into a little extra money (such as from a tax refund, bonus, inheritance etc.) that you spend 40 per cent in the future (put it into savings), 40 per cent in the past (paying down debt) and 20 per cent in the present by doing some carefree spending. Have a party and enjoy that money in the here and now!

You should always be able to enjoy your money and one of the easiest ways to do that is to ensure you can access it. Sometimes that means making sure that CRA doesn’t get it any sooner than they need to and sometimes that can help give you the ability to pay your bills on time.

Tim St Vincent is a retired CFP and is a Certified Educator in Personal Finance with the Credit Counselling Society, a Non-Profit organization. If you wish to contact Tim for a workshop or webinar, have a question or would like to submit an article idea please contact Tim at 1-888-527-8999 ext 1330. You can also contact the Credit Counselling Society for further information or assistance at 1-888-527-8999 or visit or

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