Excited about your income tax refund?

Excited about your income tax refund?

Alberta Divorce Finances: Taxes

As a personal income tax professional, nothing delights my clients more than when they are going to receive an income tax refund. Some are simply happy that they don’t have to pay and for some it is unexpected news.

But does anyone really understand why they get an income tax refund?

For the majority of employed taxpayers, an income tax refund simply means that given their situation and the items claimed on their return, they overpaid income tax throughout the year; in other words, their employer withheld and remitted too much!!! In most cases (with the exception of a few items like the refundable fitness credit, CPP overpayment and the working income tax benefit to name a few), taxpayers are getting back ‘THEIR OWN’ money. Employers do their best (with the aid of payroll tables) to estimate income tax payable and remit to CRA the correct amount. BUT, most often, they are not aware of the charitable donations employees make, the child care costs they pay, their medical expenses, investment counsel fees and countless other deductions and credits that may be applicable. Therefore when all of these additional items are accounted for, the result might be an overpayment of income tax which results in a refund.

This is a very simplified explanation but the message is that taxpayers are getting back their own money (with the few aforementioned exceptions), that they have overpaid during the year, which is being returned to them usually without interest many months later. Ideally, people have already parted with these funds so investing the refund might be your best option. In reality though, most often people comment that the refund is already spent, is going towards something they need or will pay for an otherwise unplanned trip. Whatever the case, just remember….the money was yours in the first place!!

If you have any questions or need your income tax return prepared, don’t hesitate to contact us at CalgarysChoiceTaxServices@gmail.com or (403)703-7176.