Tax season is upon us. Let’s talk about the request to reduce tax deduction that I was helping someone with.
Here is how it works. We can fill out this form T1213 to indicate in advance all sorts of legitimate circumstances to reduce income tax deducted from our paycheque by our employers. RRSP contribution is one common reason. After CRA approve the form, we can give it to HR or Payroll department. Then, we will see more cash in each of our paycheque because employer reduce the income tax they deduct. This has to be done every year. If we don’t do that, we have to wait for the tax refund which is 1 year later. That is what most people do probably because they are not aware of this form or they don’t bother. As we all know that inflation is so high, a dollar today worths more than a dollar tomorrow let alone in a year. That’s why it is more beneficial for us to get the income tax reduced from each paycheque rather than wait for the tax refund once year. Of course, if we do this proactively, the tax refund would be less than otherwise. However, this is for good reason because we have received our money much earlier! Yeah!
I suspected that CRA doesn’t like that, so they made it hard for us on purpose. 😊 We have to mail in a paper form. In the past 2 years, we had to mail it twice because I didn’t hear from them for a few months after we mailed it in October hoping to receive the approval before January. We can file our tax online, get our tax refund automatically deposit to our bank account, and receiving a PDF express Notice of assessment in CRA MyAccount within hours after filing tax returns. I think that is great achievement by CRA. So fast and efficient. Why can we just click a button to submit this form online? Is it just because it is not popular? Probably if it is made it electronic, it will become popular. I have to guess CRA wants to hold on to the tax longer before they give the money as tax refund to us. 😊 I could a wrong, just a wild guess. However, this experience below made me wonder.
My friend indicated in the form T1213 – Request to reduce withholding tax at source that she intended to contribute to the maximum RRSP limit of $30,780 for tax year 2023. She received a voicemail yesterday from CRA that they got some questions about the RRSP waiver and asked her to call back. She was wondering whether it was a scam, but the 1800 number is on CRA’s website. It seems legitimate. She called them and it was a long phone call.
First, she can’t reach the department who is responsible for this request. She had to explain to Rep on a general tax queue and then waited to be transferred to that specific team. Apparently, the team is small because the wait was around 30 minutes. A Rep finally picked up the call and asked whether there is any unused RRSP contribution from 2022. She answered accordingly but she doesn’t quite understand how this would impact the request. If there is any, she would just contribute less to ensure that she doesn’t exceed the RRSP deduction limit. From income tax deduct by employer, they only need to consider the TOTAL RRSP amount the tax payer intend to contribute and deduct for that specific tax year. The whole call lasted around 1 hour. The Rep said he will put her answer in the note and let the original Rep who was working on her request to continue. She asked when she can get a decision, the Rep said if she doesn’t hear back in May, she can call again. What! May? The Rep on the phone is very nice. He said that the team is very small, and workload is heavy. Hence, the long turn around time. No kidding! With such process, policy and culture, workload can only be heavier! I feel that this is not the best way to use government resources. For such small and routine request, they have to use the precious time of 3 agents. I recalled her experience from last year, it was just approved in a smaller amount with a few thousand dollars less, so it is only less than $50 for each paycheque. It is small for an individual. Let alone for the government. At least, the good thing last year was that CRA didn’t even call and just approved a slightly smaller amount. Saved time for both CRA and her.
I guessed that a middle manger or probably a team manager was trying to tighten the approval on this request to show that under his/her leadership more due diligence is done and tax money is withheld. 😊 They don’t have the resource to go after the big fish who is evading millions of tax dollars. They have to go after us grassroot people?
Anyhow, enough complaints for today. Hope your tax experience is better.