Offices in Ottawa and Perth
(613) 722-1500

CONTACT US (613) 722-1500

Improving Your Cash Flow – Tax Tip

Improving Your Cash Flow – Tax Tip

By:

Mann Lawyers

Posted July 12, 2018

Many people look forward to receiving an income tax refund each spring.   However, a refund means the taxpayer has overpaid taxes and it may be a sign of lack of tax planning.   In simplistic terms, a taxpayer who receives a refund has been “loaning” the government money.  A refund means that you have had less money, and poorer cash flow, over the past year, than you should have had.

Typically, large refunds are as a result of RRSP contributions or other deductions such as for childcare, or spousal support.  For instance, because periodic spousal support is tax deductible to the payor in Canada, high income earning spousal support payors can receive more than half the support paid back from the Canada Revenue Agency upon their taxes being processed.

Fortunately, the CRA allows for taxpayers to apply to have less tax withheld at source, if they know that they are going to receive a large refund.   In other words, employee taxpayers can complete a form that will increase their net pay, and therefore improve their cash flow.

For instance, a support payor who pays $3,000.00 per month in spousal support a year, and earns in the range of $125,000.00 per year, could improve cash flow by approximately $1,000.00 per month, depending on several variables.

The form, T1213, is called “Request to Reduce Tax Deductions at Source.”   Once your request is successfully processed, the CRA will send a letter of authority, which your employer’s payroll officer will then use to adjust your pay deductions.   The form typically must be completed once a year although in certain situations, support payors can apply for a two-year period.

This blog post was written by Mary Cybulski a member of the Family Law team.  She can be reached at 613-566-2073 or at mary.cybulski@mannlawyers.com.

More Resources

Blog |
Wills, Trusts and Estates
By: 
Clients frequently ask how often they should update their Wills. We generally suggest that when clients sit down to do the oh so fun task[...]
Blog |
Real Estate
By: 
A tax sale is a sale process used by a municipality, in order to recover property tax arrears that have remained outstanding for at least[...]
Blog |
Wills, Trusts and Estates
By: 

Posted March 21, 2024

If someone wishes to make a Will or appoint a Power of Attorney, they must have the requisite capacity. The determination as to whether someone[...]
Blog |
Business Law
By: 

Posted March 13, 2024

A not-for-profit corporation incorporated pursuant to the Not-for-Profit Corporations Act (Ontario) (”ONCA”) is required to maintain certain records regarding the corporation, its members, directors and[...]
Blog |
Business Law
By: 

Posted March 5, 2024

With India having touched down on the surface of the moon last year, an impressive achievement by all accounts, we are reminded of the dozens[...]
Blog |
Family Law
By: 
Co-parenting with your ex-partner can be challenging. It involves constant coordination and communication about various aspects of your children’s lives. Whether it is about schedules,[...]

Subscribe to Our Newsletter

"*" indicates required fields

Name*
Consent*
This field is for validation purposes and should be left unchanged.