If you receive a Notice of Reassessment, check to see why the Canada
Revenue Agency (CRA) says you owe more. If it’s a simple error you made in
entering or calculating, then it’s best to pay up. But if you’re not sure
what the problem is, call the CRA to find out. Make sure you have your tax
return, the Notice of Assessment, and any other supporting documents handy.
If calling the CRA doesn’t help, and you (and your accountant or tax
preparer) believe you still have a good case to make, you’ll have to file
T400A Objection – Income Tax Act – the so-called Notice of Objection. Note that you have only 90 days from
the date the CRA mailed the Notice of Reassessment to file a Notice of
Objection. In the meantime, you still have to pay any assessed amounts
owing. If you don’t, you’ll be charged interest and penalties on overdue
A tax refund might at first sound like a “gift” from the government. But
it’s not. It just means you’ve been paying too much tax through the year.
From a financial planning perspective, that money could have been earning a
decent investment return instead of sitting in the government’s general
revenue slush fund. For most taxpayers who are employed, a tax refund
simply means that the tax-owing calculation on your General T1 Tax Return
is less than the amount withheld at source by your employer.
Most employees will have filled out Form
TD1 – Personal Tax Credits
when they first joined a new employer. It includes such tax credits as the
Basic Personal Amount, as well as such items as Child, Age, Tuition,
Caregiver, Dependent amounts. If you’ve missed any of these (or added some
since you joined your employer), increasing your tax refund as a result,
you can make changes to these amounts by asking your employer for a new
Form TD1 and adjusting the various credits and amounts accordingly. That
should result in lower withholding from your paycheque.
Large refunds could also result from enhanced RRSP contributions, spousal
support payments, childcare expenses, and interest on loans made for
investment or business reasons. These typically wouldn’t be included in
source withholding by your employer. If you incur these amounts regularly,
consider filing CRA Form
T1213 – Request to Reduce Tax Deductions at Source. If approved by the CRA, you’ll receive a “Letter of Authority,” which
will allow your employer to further cut the tax withheld on your paycheque.
Then, with any luck, on next year’s tax return you’ll have a zero balance
in the refund or the amount owing box.
Meanwhile, if you do have a large tax refund, consider reinvesting it in
something that generates a return larger than the rate of inflation over
the past year. This could include, for example, paying down high-interest
consumer debt, adding to your mortgage prepayment amount, contributing to a
Tax-Free Savings Account, or topping up your Registered Retirement Savings
Plan contribution to increase your tax deduction for next year.
If your situation is more complex, consult with your financial advisor to
discuss the best way to deal with these issues, especially if you intend to
do battle with the CRA.
Robyn Thompson, CFP, CIM, FCSI, is the founder of
Castlemark Wealth Management, a boutique financial advisory firm specializing in wealth management
for high net worth individuals and families. Contact her directly by
phone at 416-828-7159, or by email at
for a confidential planning consultation.
Notes and Disclaimer
© 2019 by the Fund Library. All rights reserved. Reproduction in whole or
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The foregoing is for general information purposes only and is the opinion
of the writer. Securities mentioned are illustrative only and carry risk of
loss. No guarantee of investment performance is made or implied. It is not
intended to provide specific personalized advice including, without
limitation, investment, financial, legal, accounting or tax advice. Please
contact the author to discuss your particular circumstances.