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 |
Business Law
By: 

Posted September 25, 2023

This is the second blog addressing the new requirement for private Ontario corporations to maintain a register of individuals with significant control over the corporation[...]
Blog |
Estate Litigation
By: 

Posted September 11, 2023

Losing a loved one is never easy and dealing with the administration of their estate can be a challenging and complex process, no matter the[...]
Blog |
Construction Law
By: 

Posted September 7, 2023

As detailed in another post, Ontario’s Construction Act creates a scheme for the quick resolution of construction disputes via an “interim adjudication”. However, there has[...]
Blog |
Commercial Litigation
By: 

Posted August 29, 2023

Specific performance refers to the Court-ordered remedy that the parties must proceed with completing a real estate transaction. The recent Court of Appeal decision of[...]
Blog |
Estate Litigation
By: 

Posted August 22, 2023

A will is a legal document that outlines a testator’s wishes for the distribution of their property after they die. Section 4(2) of the Succession[...]
Blog |
Business Law
By: 

Posted August 15, 2023

Throughout their small business journey, sole proprietors need to wear a wide variety of hats. On any given day, they can be all at once[...]

Subscribe to Our Newsletter

"*" indicates required fields

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