Having a great amount of money for a tax return is nice to have. More money can be put onto debts/savings/purchasing wish list items. “But why is the government taking so much money from my paycheck in the first place, only to give me such a large sum back for a tax return?”
After speaking with our financial adviser, my husband and I saw that we could have more money to put onto debts/savings/wish list during the year. She told us of a form called “Request to Reduce Tax Deductions at Source T1213″ (for Canada). Using this form would make it so less taxes are taken off each paycheck and thus leave more money in our pocket each paycheck instead of receiving a larger lump sum Tax Return.
To implement this process (as my financial adviser told me), first you fill out the form, provide any necessary documentaion, mail it to your tax services centre and wait for approval. They like this process to start in October of the proceeding year. It must be done annually. When you receive the approval letter you take it to your payroll department and they implement the change. Don’t forget to start the process again in October for the following year.
Having the extra money throughout the year has allowed for larger extra mortgage payments, thus putting more on the principal earlier in the year and thus paying less in the long run. We’ve also redirected these extra funds to unexpected debt (van repair) and other life expenses. We were then able to avoid accumulating more debt on the credit card.
Here is link to another document that spoke more on the T1213 form.
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In the 2007 tax year I was in school for six months, and only worked for four. I talked to my friendly HR department, and they agreed not to deduct any income tax from my paycheque. It made a big difference monthly, and we were able to make a lot of major purchases (roof, car repairs) that we’d been putting off until I was working again.