We are well into a new year and you need to be send away for a tax deduction if you deserve it. Why would you do this? If you are getting a tax refund every year, then you are overpaying your taxes. You might as well put that money back on your paycheque every month.

Why would you not want to do this? Some people really like getting that money back in April/May. It is a way of saving some money. If you calculate your deduction form wrong, you might end up owing money which would not be fun.

This most commonly happens if you are contributing to your RRSP on your own or with a broker that is not affiliated with the "corporate plan" at work (if you have one). Your RRSP contributions are not taxed so the government needs to know about them.

Other reasons you might be charged too much tax:

• Child care expenses
• Alimony or other support payments - If the government doesn't know you situation until the end of the year, you be squeezed more than you should be.
• Employment expenses - If you have expenses that can be deducted because of your work (most salary jobs don't work like this), you can write them off.
• Interest on investment loans - These are RRSP investment loans or loans for any other "dividend" paying investments.
• There are other deductions as well. Talk to your accountant or whoever does your taxes.

How Much Will You Get Back

I have managed to squeeze out a little over $200/month. I max out my RRSP every year though, which a lot of people don't do. If you have other types of deductions, you could probably easily hit this number as well.

How To Do It

Tax deductions are fairly easy and I have done them each of the past 3 years. You have to do a little math, but that is about it. The form is available here on the Government of Canada's website.

T1213 - Request to Reduce Tax Deducations at Source

It is fairly simple to fill out. The form asks for numbers in a half dozen spots. Simply fill them out. How much your salary is, how much you will contribute to you RRSP, your support payments, etc.

The RRSP section asks for details on it. I just attach a sticky note to the form with the following:

1. My annual gross salary.
2. My RRSP contribution room. This will be 18% of your salary in the previous year (up to a max of $18,000 I believe) added to whatever room you still have left. So I would just take what I made last year and times it be 0.18. This will be my new room this year.
3. Your current monthly contributions.
4. What you will have contributed during the year. This is the monthly contributions multiplied by 12 plus whatever lump sums of money you have put in there as well so far (you will have only had a month or so to do this so it is probably 0).
5. The RRSP account number
6. The brokerage, broker's name, and contact information.

This gives them an idea of why you want the deduction. If you contributing on a monthly basis, then they can assume you are legitimately needing a tax deduction because of your RRSP.

Child care expenses and support payments should also have some extra attached documentation outlining how much money is going there.

When you are done filling it out. Just send it in the mail to your nearest federal tax center. They will get back to you in "government time" with a formal letter stating whether you are approved or not. Your human resuorces department will need this letter to give you your tax deduction. They don't have the authority to do it otherwise (they can get in trouble).

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