Re: Tax time. Am I the only one...
 

Hello to all posters,

It seems very apparent from all of the posts on this thread that a lot of you are very confused on the Canadian Tax laws and how the refund/taxes owing at the end of the year works. I am a CGA/ACCA (English Equivalent) and have Canadian tax experience and am finding that many expats are miss informed by employers particularly. You can owe taxes for many reasons

1) your job pays overtime -this then effects the taxes you will pay when your net pay is issued. The taxes deducted from your income during the year will fluctuate with your gross pay increasing/reducing. When the taxes are calculated this is calculated it is based on you earning the gross salary for the year without fluctuations in pay (ie take you salary for that pay period multiply it by the pay periods for the year = Gross pay for the year this is the base used for your tax deductions) the taxes deducted will be based on this factor and fluctuations will not be accounted for like they are when you are on PAYE in England. Once you income reaches a certain level in the year you may end up with a small tax bill due to fluctuations. I know this isn't exact however dependant on your circumstances this figure can vary hugely. Note: You can request to have extra taxes deducted through your employer so you will not end up with a tax bill come April 30th to spread the cost over the year, dependent on circumstances
2) Another big factor I have seen this year is based on how you fill out your TD1 with your employer, this is a form filled out when you start work that determines what further tax deductions you may be eligible to, for example if you have children or your spouse/common law partner will not be earning income for the tax year then your tax deductions will reduce based upon this information being submitted. If this happens and circumstances change, if your spouse/common law partner even reports $1 of income on their taxes then you will have not paid enough taxes through your employer.
3) RRSP contributions are a great tool to enable you to avoid a tax bill but yes they do have to be made within the 1st 60 days of 2011 to effect your 2010 taxes (ie to March 1st) so tax planning is too late now for 2010. This is a good idea to do if you are possibly going to get a tax bill. The amount of contributions required vary based on your taxable bracket so may be if an accountant prepares your taxes have them provide some tax planning on your behalf in January/February to calculate possible RRSP contributions. However if you need to borrow money to buy the RRSPs you are either avoiding tax or paying interest on amounts borrowed - you will personally need to weigh up pros and cons based on cost savings and how much you pay in interest.
4) Another consideration is any income earned in England that is brought over to Canada, this must be reported on your taxes here and if you haven`t had any taxes deducted at source you will pay taxes here on that income based on the bracket you fall in here, this is all dependant on you income. The most common examples are English pensions both state, military etc and rental income.
5) Self-Employed, if you have not paid any tax installments during the year and your business is making profits expect a tax bill

If you have the resources seek tax advice in the latter part of the year or early the next year to see where you will be tax wise for that year so you can prepare for the tax bill. Rather than put more money in the governments pocket for interest on non payment of installments and late payment interest (if you pay later than April 30) than you will be aware of taxes owing, or at least have a better view rather than have the shock when you collect your taxes or file them using turbo tax or other programs.

If you do have any questions feel free to PM me and I will do my best to answer your questions based on the info you give me, however please note I'll answer your questions based on the circumstances you provide me with and if you do fail to give me any information that will effect your taxes I will not be responsible for any differences/discrepancies when you get your final tax bill/refund

Thanks

Kirsty

Re: Tax time. Am I the only one...
 

As someone who is currently on a TWP - are we eligible to set up RRSP's or do you need to be a PR?

Re: Tax time. Am I the only one...
 

Can you bring me a can of Tennents back ? :p

I always get an accountant to do mine and always do well out of it - Spending 16k a year on daycare certainly helps at tax time and my company err on the side of caution as far as the tax goes

Also looks like it will be used on a trip home :confused:

Re: Tax time. Am I the only one...
 

You are quite right that it is possible to overpay CPP and EI contributions. Each employer has to deduct these up to the maximum so if you have three consecutive jobs in which you earned $20,000 in each job you will end up paying contributions on $60,000 although the maximum is in the mid $40,000s. However, any excess is refunded when you file your tax return.

In these circumstances you should have paid about the right amount of tax as the employers will deduct tax based on a $60,000 per year salary.

However, this is different if you have three concurrent part-time jobs that each pay $20,000 a year. Each employer will deduct taxes based on a $20,000 income and, because of the progressive rates, 3 x tax on a $20,000 is a lot less than the tax due on a $60,000 income.

I don't worry if I end up owing each year. A refund is just the government giving you your own money back, after having used it interest free for a year.

Re: Tax time. Am I the only one...
 

You can set up an RRSP.

Look at your 2009 notice of assessment. It will tell you how much your contribution limit was in 2010. Add to that 18% of your earned income in 2010 and that is how much you can contribute in 2011.

Re: Tax time. Am I the only one...
 

I am on a work permit and have only been working since November last year. I pay into and RRSP but I haven't had a statement through, although my husband has (He's been working 2 months longer than me). Do I still need to do a tax return? I have my end of year statement from work but nothing else. I doubt I would owe anything or be due anything back (or not much anyway) but I don't want to get on the wrong side of the law!

Any advice appreciated!

Re: Tax time. Am I the only one...
 

Yes you need to fill in a tax return.

Re: Tax time. Am I the only one...
 

Don't the tax people get a little upset if you claim RRSP's without having previously filed your first income tax return as there is no previous years income to base the claim on.

In other words you can't claim an RRSP deduction on your very first tax return.

Re: Tax time. Am I the only one...
 

This is right. There are some exceptions:

* if you are required to contribute to an RRSP by your employment contract.
* any contributions in the first 60 days of 2011 are considered as 2010 contributions. However, if you didn't have any contribution room in 2010 you are not penalized as long as your "2010" contribution is less than your 2011 limit.
* there are a few other oddball exceptions.

You are always allowed to be up to $2,000 over you contribution limit without penalty.

Re: Tax time. Am I the only one...
 

Yes you can't claim an RRSP deduction on your first tax return but you can still contribute up to $2000 in your first year in Canada and make the claim for that amount in the second year. This could be useful for people starting work in Canada part way though the year who want to contribute to a company RRSP to benefit from the company contribution.

Re: Tax time. Am I the only one...
 

I'm a fan of doing my tax return, but that's really helped by us moving around all the time.
Moving expenses + childcare + moving to a Province with a lower tax rate half way through the year = "intaxication" :)

I've heard the most depressing result is based on moving to Quebec on Dec 30th :eek:

Re: Tax time. Am I the only one...
 

Yes, I can now confirm that they are going to knacker me on this :frown:

Re: Tax time. Am I the only one...
 

The $2000 overpayment is not subject to the same conditions as normal contributions. Any over payment you make you have to pay the tax on.

Re: Tax time. Am I the only one...
 

Someone will explain this much better and more fully than me, but remember putting money in an RRSP defers the payment of tax. You will pay tax when you withdraw in retirement. They thus make sense if your income is high now and lower in retirement but are not necessarily great for all. My wife doesn't earn a huge amount so has a TFSA rather than a RRSP.

Re: Tax time. Am I the only one...
 

You just carry it to the next year and claim the tax then.