“Will I get a tax refund?”
It’s the most common question people ask us at Signature Financial. Simply put, if you didn’t pay enough tax throughout the year, you will not get a tax refund. Instead, you’ll likely owe the government money.
Tom comes to us with two T4 slips: $6,000 from his first job and $30,000 from a second. His first employer only deducted $7 in tax from the $6,000 job. When you add the two incomes together, you’re taxed on the whole amount, which in this case is $36,000. So Tom hasn’t actually paid enough tax throughout the year.
In this case, as accountants we would go through Tom’s personal situation (his claims, benefits, RRSP contributions, check if his employment or relationship status has changed, find out if he has dependents etc.), and work out what tax he owes.
If you are a student:
As a student, scholarships, and grants are considered income, so be sure to declare the amounts received.
However, there are many deductions for students including: moving expenses, interest paid on student loans, education and textbook costs, childcare, and public transport. See the full list here and keep all of your receipts.
Check here if you need to file a tax return as a student. If you are owed a refund, you can’t get it unless you file.
If you were unemployed and received Employment Insurance benefits:
Employment Insurance (EI) is taxable income. Depending on your net income, you may be required to repay some of the EI payments you received. You’ll get a T4E slip that will tell you if you must pay. According to the Government of Canada:
“If your 2016 net income from all sources exceeds $63,500 you will be required to repay 30% of the lesser of:
- your net income in excess of $63,500; or
- the total regular benefits, including regular fishing benefits, paid in the taxation year.”
There are some exemptions to this rule, which you can find here.
If you and your partner are filing as common law:
If you and your partner have been living together for more than 12 months, you must file taxes as common law–which may affect your tax rate. Children and dependents will also affect your tax rate, and may also make you eligible for additional benefits.
How much of my annual income should I save to prepare for paying tax?
It’s smart to save between 20-30% of your annual income. If you don’t end up paying as much, you can always put it towards your savings or retirement plan!
If you’re wondering if you’ll get a tax refund, or have other questions about your taxable income, email us to set up an appointment: email@example.com.