How To Use a T1213 Form – Money Now or Money Later?

Worker A“I can’t wait for my tax return this spring, I could really use that thousand bucks right now”

Worker B“Are you serious?  You let the government take an extra thousand bucks from you when you didn’t have to?”

Worker A“What are you talking about, I didn’t have any choice, it just comes off my cheque every week.  Besides, I like having a big cheque to look forward to.”

Worker B“Suit yourself , I’m just going to continue to let my money earn interest for me in my bank account, instead of in the government’s.”

If you’d rather be “Worker A” (and there are actually a couple of valid reasons for making that choice) then you can probably click through to another article more to your liking.  If you’re interested in keep your own money instead of lending it to the government for free for a few months, then you should probably read on.

When you start any job in Canada, the employer is supposed to provide you with TD1 forms for your province/territory in addition to the one that is Canada-wide.  This form has several questions on it.  They mostly revolve around what tax credits you will be entitled to.  This determines how much tax you are likely to pay for the upcoming year, and consequently how much an employer is supposed to take off your cheque and remit to the government.  The credits and deductions on a TD1 form that can be claimed are:

1) The basic personal exemption (everyone gets this)

2) Your age amount (for people 65 or older)

3) Pension income amount

4) Amount for children under 18

5) Amount for caring for an infirm adult

6) Spousal amount

7) Tuition, education and textbook amount (the one I’ve used the most)

8) Medical amounts (depending on your income and expenses)

9) Caregiver and disability amounts if you care for a dependent who is sick and/or disabled.

To see what a TD1 form for 2012, you can click here for a link to the Canada Revenue Agency’s PDF.

Now it is definitely in your best interests to take a couple minutes and make sure you get all of the available credit and deductions that the TD1 offers, because who really wants to give up more of their paycheque than they have to right?  The T1213 form allows you to take the process of keeping your own money in your pocket one step further.  Basically what this form is meant for is to allow someone that knows they will be getting money back on their taxes to get at it sooner.

Technically the T1213 form is a “Request for a Reduction in Tax Withholdings”.  If you will be spending money on the following expenses that are tax deductible or eligible for a tax credit, you can get your hands back on your money a lot faster:

1) Pre-authorized RRSP contributions (you will need a copy of the agreement you signed with your financial institution to make this happen)

2) Employment-related expenses (you’ll need to fill out for T200 or form T777 in this case)

3) Charitable donations

4) Child care expenses

5) Public transit expenses

6) Fitness and Arts tax credits

7) Other common tax deductible costs like moving expenses or the interest on loans taken out for investment purposes.

For options 3-7 you may be asked to provide the relevant supporting documentation as proof.

After you submit the forms to the CRA, you should be getting less taken off of your cheque in about six weeks.  Just remember that you won’t be getting that nice little spring time bonus this year after tax time.  I probably shouldn’t even call it a bonus because the truth is that many people already struggle to understand the fact that the government is not paying them that money, it is merely giving them back money they never should have taken in the first place.

Now, while I prefer to keep my money in my bank account, there is an argument for people to stick with their current penchant for waiting out the big refund.  The best reason I can think of for this is that many people would allow a fairly minor weekly increase in their paycheque to impact their spending habits, and would likely watch the increase in pay slide right through their fingers.  By comparison, when a big cheque comes from the government in the spring, I believe it increases the chances that a person will choose to do some good with the money such as put it in a savings account (preferably a tax-advantaged one).  If you are just starting to get the hang of saving and budgeting, this “forced savings” as the government likes to call it might actually be in your best interests until you’re more comfortable handling your own money on a monthly basis.

I’ve told a few people about this option, and while they were very surprised and enthused at the idea of keeping more of their tax dollars, they never followed through with actually filling out the forms.  I guess any tax-related stuff is just too intimidating for many folks who were never given much education on it when they were in school or from their parents.  Have any of our readers actually taken the steps to fill out a T1213?  When I did it, it seemed relatively easy and the CRA hasn’t ever raised any concerns.  Now that you know about the form, do you think you’re very likely to file one?   Why or why not (sorry for prying, I’m just curious as to what would stop someone).

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20 Responses to How To Use a T1213 Form – Money Now or Money Later?

  1. I’ll be honest, I’m one of those people that goes the opposite direction. I’ve actually asked my employer to take off more tax than necessary. I do this for a couple reasons, one of which is the point you mentioned where some people find it easier to do smart things with a larger sum of money than lots of small bits. The other reason is because my income is somewhat variable. I’ve been hit with an unexpected tax bill before, and honestly I never want to have to deal with that again. That and I want to earn a bit of money on the side. If I ask my employer to take extra off, I don’t have to worry as much about the tax on the side earnings as I would otherwise.

    • That makes sense Cassie. Kudos to you for applying critical thought to you personal situation and coming up with a solution that works best for you. Sounds like you’re pretty on top of things!

  2. I’ve filed T1213s several times for lump-sum RRSP contributions. The T1213 form makes it seem like you can only do this for pre-authorized periodic RRSP contributions, but I’ve never been turned down. One catch is that I don’t have the RRSP tax slip because they don’t get sent out until January or February. I’ve just sent screen-shots (with account numbers removed) of the money leaving one account and entering the RRSP account.

    • That’s a great ideal MJ. Great to know that you’ve never been called on it beyond that. There’s really no reason you should be when you think about it rationally – then again, sometimes the taxman isn’t entirely rational. Thanks for the tip!

  3. Hey MJ, can you clarify something to me, are you saying Jan 1st comes around & you could say make a lump sum contribution of say 20K & your employer would reduce your takes paid at source each pay? (that sounds like an amazing way of doing things. I’m a bit behind in my RRSP contributions & have a WAD of cash & want to get into my RRSPs, but I don’t wanna put much more than 20K/year to get the most tax advantage I can, I had been thinking of dripping the amount through my company group RRSP, but honesty I don’t like my investment options with them, so this would give me a much greater option.

    Do you buy your RRSP before sending in your t1213 form to the government (so you can include the screen shot with the purchase proof?

    So I assume once I’m squared away with the government, I then ask my company for a TD1 form to fill out so that they know to do the deduction?

    Thanks in advance,

    Gary

    • @Gary: I tend to do this closer to mid-year, but it could be done Jan.1 as well. I make the contribution first, then get the screen shots of the transactions in my trading accounts. Then I fill out the T1213 and sent it in along with the printouts of the screen shots. Part of the form asks for contact information for my company’s payroll people, but CRA never seems to contact them. Instead, I get a letter back from CRA approving the reduction in payroll taxes, and I take this to our payroll people. Starting the next pay they take less tax off me for the rest of the year. There is no involvement of the TD1 in this process. Your mileage may vary.

  4. Once we started contributing regularly (on a monthly basis) we filled out this form so that less tax is taken off each month. If you want a lump sum in the spring, save it yourself! Put the extra money you’re not paying in taxes each month into a high interest savings account and ignore it until you need it.

  5. Well it does help me save! I save at least 10% of our household income towards our RRSPs, the tax refund at the end of the year goes toward the TFSA and then I try to make extra principle payments toward my mortgage throughout the year. To me it helps me save more and works to separate money into “chunks” better. Especially right now with so many competing goals like education, travel, furnishing the new house… these things can eat up a person’s budget if you’re not careful! I’m always updating the way I do things as I go along so someday I may decide to take the money throughout the year.

  6. Thought about this before, but never had a good reason to fill out the form; because the fact was that I didn’t have that many regular monthly deductions. Things have changed now, in the process of setting up regular rrsp deductions and we have our rather large childcare expense now.

  7. Heh there! Im new on this page and I think I’ve come right a the good place! So here’s my question: Im filling out the T1213 for the 2013 year. I would like to know if there’s a way for me to, while reducing my tax at source every month, to contribute to my RRSP in a way that my monthly deductions will be equivalent to was I was paying solely in tax prior to filling the form???

    • I think it would just be a matter of doing the manual steps necessary to set up an automatic contribution plan with your financial institution after getting less tax taken off at the source.

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