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Update Your 2008 TD1

You can get this form here --> Image.

I tell you this each year. And around Dec 20 each year the CRA comes out with new versions of the TD1 forms. These are the forms you fill in and give to your payroll department where you work. They are used it to calculate the source tax deductions on your paycheque. Be sure to fill in both the federal and the provincial TD1 forms. There are several good reasons to update the forms at least annually, or if your situation changes.

ImageIf you look at the 2008 version, the basic personal amount has increased to $9,600, and the spousal amount has increased to $9,600. This means that you get to keep even more of your hard earned money. If you don't fill in the form and provide it to your payroll, they will probably just continue with the last year's figures.

ImageIf your employer deducts too much tax at source, that means you will just get a large refund at the end of the year. So what is bad about that? Well here are some things to consider:

  1. CRA does not pay you interest on the tax overpayment. If your employer deducts too much tax, they will not pay you interest either.

  2. The money you are not getting could be put towards something useful, such as paying off your high-interest credit cards, or investing in some RRSPs. It does not make sense to lend it to the government for free.

  3. When it gets to completing your tax return at the end of the year, you get a large refund. The CRA takes notice if you get large refunds, and it is more likely to earn you an audit. Especially if you do this several years in a row.

  4. If you get that large refund cheque, you are more likely to do something reckless with it, rather than put it towards things like debt repayment or investment.

If you can, it is best to correctly fill out your TD1 forms so that you break even, or your tax refund is modest.

Are there times you want to pay more tax? Yes of course, such as when you have additional income, and you expect to pay tax on it later. You can have additional tax collected from your payroll, so that at year end you won't owe too much tax. Again the goal is to break even.

** Bonus **, get your BC TD1 here. For all others look here.

Remember the 2009 TD1 will not be available until December 20, 2008.

Pat

 
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