By Robb Engen

I received an email from our payroll department advising me to update my Personal Tax Credits Return – or TD1 form – for next year.

This return determines the amount of tax that is deducted from each paycheque. Canada Revenue Agency says the average tax refund was $1,400 last year, suggesting most Canadians overpay their taxes by moe than $100 a month.

Why are we so willing to give the government an interest-free loan just to get a tax refund later?

Be tax wise and look to your payroll department to help you take control of your gross earnings so you pay the correct amount of tax with every paycheque.

Start with the TD1 form. There’s one for federal and one for provincial tax withholdings. The TD1 allows you to exempt yourself from paying tax if the personal total taxable income is less than the TD1 amount claimed.

Instead of just claiming as single, take a look at last year’s tax return to see what you claimed. Will anything change this year? If you’re getting married, going back to school or having a baby you can get extra reductions to tax withholding requirements.

If you make RRSP contributions, have childcare expenses, or carry significant deductible costs such as moving expenses or large charitable donations, complete form T1213 – Request for a Reduction in Tax Withholdings and send it to the CRA. They will give your employer permission to reduce your taxes at the source.

But don’t stop there. There are other benefits available to employees under the tax system.

Your employer may be open to negotiating for both cash and tax-free perks of value to you and your family. Some examples are discounts on merchandise, education costs for courses that benefit the employer, membership to fitness clubs, computers and communication devices, retirement savings, private group health care benefits and life insurance.

If you have out-of-pocket expenses relating to your employment, keep form T2200 Declaration of Conditions of Employment signed by your employer in your files in case of audit.

The form states that these expenses have not been reimbursed and are required as a condition of your employment. Some examples you can claim include automobile expenses, travel expenses outside your metropolitan area, parking costs (but not at your place of employment) and new tools for certain tradespeople.

With less tax taken from your earnings you can use the money to pay non-deductible credit card debt, pay down your mortgage, or contribute to your RRSP or TFSA. This is the best way for you to put more money in your own pocket all year long.

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So stop sending the government so much of your money in advance. By minimizing the tax that’s withheld at the source, you’ll have more money to save, invest or pay off debt.