Time to stop thinking of refunds as windfalls to pay off credit cards and bills, tax expert says
Key findings of the poll include:
• Of the 54 per cent of Canadians expecting a refund this year, more than one in five (22 per cent) plan to use the refund to reduce high-interest debt like credit cards;
• An almost equal number (21 per cent)don't know what to do with it; and,
• Just 10 per cent plan to save or invest the funds.
"A tax refund isn't really a windfall," says
"While using the refund to cut debt remains top of mind for most Canadians, it's important to sit down with your financial advisor to plan the most tax efficient way of saving and spending your money," says
"What excites people most about making an RRSP contribution is the prospect of getting a big tax refund, but there's an easy way to get that refund essentially in advance," he says.
If you're an employee, subject to tax withholding at source, and you make regular registered retirement savings plan (RRSP) contributions, you don't have to wait until next spring for that refund, he says. By making contributions directly from your gross pay, you immediately reduce the amount of tax withheld from your paycheque. You can also complete Canada Revenue Agency Form T1213, Request to Reduce Tax Deductions at Source, in which you can list, among other items, RRSP contributions to be deducted from your income when your employer calculates the tax that will be withheld from your pay.
For those receiving a tax refund this year or saving taxes with each paycheque,
"Paying down debt, and contributing funds towards short and long-term goals are all important elements of a comprehensive financial plan," he says. "Whether you decide to save or pay off debt, the most important thing is to make an informed decision."
KEY POLL FINDINGS
Percentage of Canadians who expect a 2013 tax refund:
|Don't know / Prefer not to answer||12%|
Percentage of Canadians planning to spend their tax refund on:
|Make a credit card or loan payment||22%|
|I haven't decided yet/putting it aside||21%|
|Use for day to day expenses (e.g., groceries, bills, gas, etc.)||19%|
|Contribute to investments||10%|
|Put towards a major household purchase (e.g., appliances, furniture, home repairs)||7%|
|I'm going to splurge a little (e.g., clothes, jewelry, electronics)||3%|
|Pay down mortgage||3%|
|Prefer not to answer||2%|
From April 8th to April 9th 2014 an online survey was conducted among 1,517 randomly selected Canadian adults who are