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Putting Your Canada Tax Refund to Good Use

Tax refund cheque

Finally you got that tax refund that you were waiting for, and yes you did submit your taxes correctly and got the refund you expected.   Or an even nicer surprise is that you got back more than you expected.  A word of caution here though, if you got back more than you expected perhaps there was an error made in your return and errors can easily work against you as well.   It is important that no matter what the outcome of your tax return is, that it is accurate based on a correct filing.   To avoid mistakes it is well worth having a professional accountant do your taxes for you.

Now you have cheque in hand what are you going to do with it? If it is only a small amount then it’s not going to demand too much thought. It may be enough to take the family out for dinner or maybe a little more that would cover a day trip.

Anything that you consider to be a substantial amount should be considered a little more carefully. You could really make the refund work for you. The first thing you want to do is look at your debts.   It really is unpleasant to think that you may have to use this money to bring down your debt burden, but if used correctly it could lower your interest rates on your credit cards for example, and then you really are going to get a long term benefit from this tax money.

When you see that a larger payment made against your credit cards substantially lowers how much you are paying out in interest it could act as an incentive for you to really tackle that credit card debt.   Once you do this in the long run you are going to get out of debt much faster.

If you don’t have any significant debts that incurring high interest rates then you may want to consider some type of investment.   It could be into a registered savings plan, or perhaps an educational fund for the kids for their upcoming education.

By not just taking your tax return and spending it frivolously you are utilizing it with a greater impact.

One thing you may want to take a look at is why you got back such a big return in the first place.   If you feel that this is going to be an ongoing occurrence then you may want to think about reducing your tax submissions throughout the year.   However, in most cases you may find that by letting these tax returns accumulate over the year you are far more likely to make good use of the money in a lump sum as opposed to as a tax payment reduction.

 

 

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Sam Seidman, CPA, CA, LPA
629 Sheppard Avenue West
Toronto, Ontario
M3H 2S3

Telephone: (416) 398-1700
Fax: (416) 398-6226

Chartered Professional Accountant, Chartered Accountant, Licensed Public Accountant

Email: sam@torontoaccountant.ca

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The information provided here and throughout the site of TorontoAccountant.CA is intended for general tax information only, and should not be misconstrued as a legal source of information regarding your tax situation, or be used for any other purposes other than for general information.
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