Is This Right? Top 8 Reasons Why Your Tax Refund Is Less Than You Think

by Guest on March 26, 2012

    • New mom surprise: Service Canada usually withholds insufficient tax from EI benefits. If you are a repeat claimant and your net income is more than $55,250 you may also have to repay some of your benefits. This means that some new mothers find they owe tax even though they can claim the child amount for the newborn.
    • Newly retired: Recently retired seniors often find themselves in a pickle in the year they retire with a tax bill in the year they retire because no tax is withheld from their Old Age Security (OAS) or Canada Pension Plan (CPP) retirement benefits unless they specifically requested it.

  • Dependants hit 18: Once your child turns 18, they are no longer considered a dependant for tax purposes unless they are disabled or infirm. So even if they are still living at home, eating your food and driving your car, they are not a dependant on your tax return when they are 18.
  • Spouse starts working: If one spouse earned little to no income in 2010, it means the other claimed the spousal amount which is about $1,500 in federal tax savings. But if both spouses worked in 2011, the credit goes away if each of them earns more than $10,527 each.
  • RRSPs down, TFSA up: Choosing to contribute more to your TFSA rather than RRSP does have its advantages but a TFSA does not result in a tax deduction. If your RRSP contributions are a little lower in 2011, your refund will reflect this.
  • Self employed income: If you earn more than $3,500 in self employed income, you will need to pay both the employer and employee portions of the Canada Pension Plan premium. You do not pay EI premiums unless you sign up for the program.
  • Government changes: Every year, there are changes to the Tax Act. For example, Ontario residents are no longer receiving the Ontario Energy and Property Tax Credit, Sales Tax Credit or Northern Residence credits as part of their tax refund. These credits will be combined into the new Ontario Trillium Benefit and paid in monthly installments starting in July 2012.



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