How to get your tax refund throughout the year

National Post


Tax season is almost upon us, although you'd hardly know it given the huge push encouraging us to make an RRSP contribution in advance of the looming March 1 deadline.

Yet this past week, the Canada Revenue Agency opened up its NETFILE program for the season which allows individuals to electronically file their 2012 personal income tax and benefit returns using commercially available tax-preparation software, which, depending on your situation and/or income level, may be free.

What's different for 2013 is the CRA is no longer mailing an access code to eligible NETFILE taxpayers, effectively eliminating the need for the access code altogether.

So, without the NETFILE Web access code, how do we file online this year? All it will take to file your 2012 return online is your social insurance number (SIN) and your date of birth. Worried about someone else, like a disgruntled ex-spouse, going online with your SIN and birth date and absconding with your tax refund?

Not to worry, says the CRA, since no taxpayer information, such as banking information or your address, can be viewed or changed through NETFILE. Once a tax return is filed, the notice of assessment and refund are sent to the address and/or bank account the CRA already has on file.

This means if you need to change any personal information on your tax return, you have to first update it with the CRA before you NETFILE. This can be done using the secure online service called "My Account" or by contacting the CRA directly.

The early launch of NETFILE, however, does raise the perennial question: Why are Canadians in such a rush to file their 2012 returns early. The most likely answer is that many are expecting a tax refund. For 2011, the CRA reports that the average refund was $1,580, up $70 from the prior year.

But a tax refund is simply a sign you've loaned your hard-earned money to the CRA for a year or longer and you're just getting your own money back, interest-free.

An easy way to avoid or at least try to minimize your tax refund for 2013 is to complete CRA Form T1213, Request to Reduce Tax Deductions at Source in which you list various deductions that you plan to take when you file your 2013 return, such as RRSP contributions (other than those made through payroll deduction), support payments or childcare expenses.

Send it to the CRA and, if approved, you will receive an authorization letter which you can hand over to your employer's payroll department authorizing them to reduce the amount of tax withheld at source from your paycheque.

This way, you can get your refund through the entire year and make it work for you, perhaps by using it to pay down debt, save for your kids' college education by contributing to an RESP or even setting up a regular RRSP contribution so you're not rushing to meet the 2014 RRSP deadline.