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Last tax season, the average tax refund was $1,765. Should tax withholdings be reduced to help Canadians with debt and savings?


Yes I think withholdings should be reduced, but there are just so many folks out there that use their tax refund as their savings account!  And they will be happy with a big refund rather than the smaller amounts they would get each month, which would then just get spent!  Many treat that refund much more wisely that they would with an extra few dollars on their pay cheques!!

By Ron McPhail on February 21, 2019

Most people count on that money to help with the ever growing cost of living

By Jeramy on February 21, 2019

No, to what level should the withheld tax be reduced?  The average refund ($1,765) is insufficient to motivate most taxpayers to save and pay down debt because they are already burdened with “living expenses”. Rather, the tax rate should be reduced for low- and middle income wage earners. Plus other tax credits and incentives. This would likely raise the average refund. With that information tax professionals would probably offer tax education to clients of the path they can take to pay down debt and invest.  The interests on Credit Cards push up debt because interest rates are far too high with little to pay on the principal.  Financial discipline is difficult in this game.

By Trevor Hitchman on February 21, 2019

Most prefer to have the refund, it has turned into a short term savings account.  Maybe we should encourage CRA to pay interest on the refund.  It would push CRA to reduce the amount of taxes taken as they wont want to pay interest, but recognize the amount as a true short term savings account for the tax payer.

By Clare on February 21, 2019

We need comprehensive assesssment, it would make more sense.  Then the people who know they have high medical, could use those to bring down their withholding.


By PRITHVIRAJ on February 15, 2019

I wish I could say yes, but a lot of Canadians are not responsible enough to use the extra monthly cash in a beneficial way.

By Cindy on February 13, 2019

Inspite of advice to the contrary many clients still want the refund at the end of the year.  Their idea of a reward at tax time or forced savings.

I do however explain their options and the reasons.

By Jo Anne knapp on February 13, 2019

really depends on personal preferences . Many clients do not like over paying (lending money to the government) and getting it back a year later. On the other hand , many prefer to get money back and not have to write a cheque at tax time .

By Dan Boyd on February 13, 2019

I thought about this and I don’t think it would help, except in very rare cases. The clients I dealt with in Calgary and certainly the ones I deal with here on the outer arm of the galaxy all want that refund at tax-filing time. If the deductions were reduced paycheque by paycheque, The bills would still pile up, the bit extra in the paycheque would be spent on trivialities, nothing would get saved and at the end of the year there would be zero refund, but the rent is still six months behind and the credit card debt is sky-high and there is nothing for them to reduce these debts with. I can easily see that everyone would like to pay reduced taxes, but even so they still want that refund at the end of the year and it won’t be there. Typically, my clients claim the Northern Resident Deduction. They could get this benefit paycheque by paycheque by putting it on the TD1, but they would kick up Hell at tax time because they would not be able to understand that they already had that benefit, (and wasted it!) and you only get it once. I know this. I have tried to explain it and failed and given it up. It gets claimed when we do the return. I think that reducing the tax payments over the year would not benefit many people. It may be better that we try to do a bit towards saving them from themselves.

By Mitzi-Lynne Morgan on February 12, 2019

I suggest to Seniors that get a refund they should reduce it.  Better to have the money monthly.  Usually tell them it is better they get to spend their money than their heirs.

Also in BC after the age of 55 we can defer our property taxes.  Really helps!

By Pat Morton on February 07, 2019

There are things that bring down your tax over and above the items listed on the TD1.  If that was more comprehensive, it would make more sense.  Then the people who consistently tithe, or know they have high medical, could use those to bring down their withholding.

By Doris Woodman-McMillan on February 06, 2019

You are all looking at the individual tax payer but what about the business tax payer who pays monthly to Corp Tax on the basis of the profit of the previous year end—business becomes slow so very little profit but you have paid monthly to CRA.  Try getting that back in a timely period after you have filed your year end—you will no doubt expect an audit as they hate to give up money paid in two years ago.  Expect an audit which is very time consuming and a great expense to the business owner.  CRA would give you penalties back to each months Corp Tax bill if it wasn’t correct by their auditors.

By Leanor Davidson on February 06, 2019

I think the tax refund scenario is a win-win for everyone.  The government gets the free use of our money for part of a year, and we get a forced savings with a lump-sum payout at the end of the year.  If not withheld from paycheques, many taxpayers would spend it all as soon as they receive it anyway. And if the government didn’t get the free use of our money throughout the year, they would instead need to raise the tax rates.  Would we like that any better?

By Daniel on February 06, 2019

While a lesser refund would totally make sense, since it is the taxpayers money the government is working with, many people would not really benefit from it. How many taxpayer waiting for that cash tax refund to make whatever purchase or going on a vacation. For all the wrong reason most of them do not think of the non existing benefit this actually has, rather when having the money available already during the year. All of these many taxpayers who are waiting for that refund would not save a dime during the year, and without this little bright light of the refund they may would not ever make this purchase or taking this vacation or worse paying down debt.

By Frank on February 06, 2019

I would like to know what deductions and/or credits are being claimed to generate the 1,700 refund.  Is this a one time RRSP purchase in February and therefore CRA had use of the refund for about 2 months. Even it was monthly contributions out of your bank account and not through work, average it out over the year and really how much interest are you losing. Is it from a year end charitable donation, again not really much interest lost. If it a disability credit claim for a dependent or spouse, then yes the TD1 should be filled out and given to your employer to reduce tax withholdings. In this case I’m sure the extra cash on the paycheque would help with day to day costs associated with the disability in the house. I agree with other comments here, the majority of my clients want a refund at tax time and will use additional tax deductions as a forced savings.  I have seniors that don’t owe income tax, but still want a little tax off their OAS or CPP just so they have a lump sum refund for summer.  It’s much easier delivering a tax return and telling your client you get a small refund compared to a balance owing.  Again I agree with the comments on here that most taxpayers would spend the money in each paycheque and not necessarily use it for debt or savings. A 1,700 refund spread over 26 bi-weekly pays amounts to about 65 a pay.  At the end of the day how much interest/investment income is being lost on this interest free loan to the government?  To answer the question, No I don’t think tax withholdings should be reduced.  Thank you.

By Tim on February 06, 2019

Most of my clients have “mixed bag” of income sources and often have to pay in additional tax, which few plan to have the cash. Painfull!!

By Sidney Schultz on February 06, 2019

I would hesitate to recommend lowering withholding taxes, as it may create owing tax at the end of the year and this is very hard for tax payers to deal with.
I always find there are employees who ask to have more tax taken off each pay cheque.


By Alice Manderson on February 06, 2019

I would hesitate to recommend lowering withholding, as I have worked with too many clients who depend on the “Rev Can savings plan” and for whom actually owing would be a disaster.  Indeed, when doing payroll, I always find there are employees who ask to have more tax taken off each pay cheque.

It is easy to look at this $1,700 plus as a “wasted” opportunity but - especially for those taxpayers who don’t have that much discretionary income - this is the best way for a lot of people to accumulate some savings.

By Jo Ruelle on February 06, 2019

Advisors both tax and planners should be working with their clients to update the TD1 each year. Another value add that gets missed too often.

By Heather on February 06, 2019

Yes, withholding should be reduced a little.  It’s a free loan to the government. Having said that, however, many taxpayers would not reduce debt or save it, but consider it just more cash in their pocket to be spent. They just wouldn’t have to wait until the following April to receive it. A person can already ‘reduce tax deductions at source’, if they make arrangements to make contributions to an RRSP and have their employer fill out the form.  That way it is a forced savings.

By Martin on February 06, 2019

In my 35+ year as a tax accountant, the vast majority of my clients (90%+) want to see a refund from their tax return filing.  The reason for this, is that they see the refund as a tax-free “bonus” part of their income.  They do not see it as paying too much in income taxes.  Many of my clients actually rely on a tax refund to finance their vacations, home renovations, etc.

If their tax deductions are reduced at source (from their paycheques), their standard of spending will simply increase accordingly.  They see their refund as a type of “forced” savings tool.  Even after I explain to my clients this means the Government had their hard-earned money for more than 12 months, interest-free.  My clients simply want a refund every year!

By Gaetan Ladouceur on February 06, 2019

I would say no as this would be very be mixing all taxpayers I take it.
People ar not going to reduce debt or save as this isn’t in the nature of most taxpayers thus making a tax liability in some cases.

By Murray Nutter on February 06, 2019