TSG (Tax Specialist Group) - Source Deduction Waivers (Source Deduction Waivers)

While some individuals prefer to receive a refund when they file their income tax returns, many prefer to increase their periodic take-home pay instead.

If expenses are easily confirmed, requesting that the CRA approve a reduction in the amount of tax withheld at source can be an easy way to convert a year-end refund into increased take-home pay each month. A request for a reduction in source deductions can be made on Form T1213.

If an individual claims properly supported deductions for items such as RRSP contributions, child care expenses, support payments, employment expenses, charitable donations or interest expense, the CRA will authorize a reduction in source deductions.

The CRA unit that processes these requests will not approve a request if taxes are due or tax returns are outstanding, including a return that has been filed but not yet assessed.

Requests must be made annually. Where someone has deductible support payments that are the same or greater for more than one year, a two-year waiver is available. It is a good idea to submit a request prior to the beginning of a calendar year, as the CRA is not inclined to allow a retroactive request for a reduction in the amount of source deductions.

Source deduction waiver requests usually take four to six weeks to be processed by the CRA, so it is a good idea to start the process now for 2015 requests. Employers are not allowed to reduce withholdings below the statutory requirements unless they have approval from the CRA. The approval of a reduction is not retroactive. If it is not granted before the first pay period for 2015, some periods will not be subject to reduced withholdings.

TAX TIP OF THE WEEK is provided as a free service to clients and friends of the Tax Specialist Group member firms. The Tax Specialist Group is a national affiliation of firms who specialize in providing tax consulting services to other professionals, businesses and high net worth individuals on Canadian and international tax matters and tax disputes.

The material provided in Tax Tip of the Week is believed to be accurate and reliable as of the date it is written. Tax laws are complex and are subject to frequent change. Professional advice should always be sought before implementing any tax planning arrangements. Neither the Tax Specialist Group nor any member firm can accept any liability for the tax consequences that may result from acting based on the contents hereof.