Saturday, 2 April 2016

Why Owing at Tax Time is a Good Thing

Filing your taxes
If you're like me and haven't filed your taxes yet there's probably a pretty good chance it's because you owe money to good old CRA. When I was just out of school and had all those education credits to claim I always had my taxes filed ASAP so I could get that refund but these days I'm always owing money and leave it as long as possible. 

Now, who hates having to pay up come tax time? Everyone right...my hand is raised. The thing is though, it's actually a good thing to have to pay CRA come tax time.

Let's talk about why. Basically, if you owe money at the end of April it means that you didn't pay enough tax during the year so CRA has give you an interest free loan for that time. Not a bad deal right? You're not going to be able to get a loan from anywhere else that isn't going to cost you anything. And if we look at it the other way, if CRA actually owes you money, it means that you have given CRA an interest free loan for the year...not exactly what you were planning on right? 

Now don't get wrong, I completely understand how crappy it is to cut a cheque to pay your taxes and also how exciting it is to get a big refund. Let's compromise, the goal come filing time is to be as close to even as possible. You don't owe anything and they don't owe you anything. That way you're in control of more of your hard-earned cash year round and can do with it what you please; saving it all away for a rainy day obviously ;) 

How can you make keep track of where you stand tax wise? Keep an eye on those pay stubs so you know exactly how much you are bringing in and can make sure your employer is taking off the right amount of tax. That's not always the case, I know my old employer didn't take enough off and I got caught owing a bigger amount than I expected one year. You can always ask your employer to adjust your with-holding tax if need be. If you're self-employed or just have some side income make sure you track that too. It's important (vital) to set aside a portion of your income so you can pay your taxes when they come due. 

Long story short, don't curse too much if you have to pay CRA at this time of year...you're actually getting a bit of a deal! 

Filing your taxes

3 comments:

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    1. Thanks Tim, I appreciate the comment!

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