While some individuals prefer to receive a refund when they file their income tax returns, many prefer to increase their periodic take-home pay instead.
If expenses are easily confirmed, requesting that the CRA approve a reduction in the amount of tax withheld at source can be an easy way to convert a year-end refund into increased take-home pay each month. A request for a reduction in source deductions can be made on Form T1213.
If an individual claims properly supported deductions for items such as RRSP contributions, child care expenses, support payments, employment expenses, charitable donations or interest expense, the CRA will authorize a reduction in source deductions.
The CRA unit that processes these requests will not approve a request if taxes are due or tax returns are outstanding, including a return that has been filed but not yet assessed.
Requests must be made annually. Where someone has deductible support payments that are the same or greater for more than one year, a two-year waiver is available. It is a good idea to submit a request prior to the beginning of a calendar year, as the CRA is not inclined to allow a retroactive request for a reduction in the amount of source deductions.
Source deduction waiver requests usually take four to six weeks to be processed by the CRA, so it is a good idea to start the process now for 2015 requests. Employers are not allowed to reduce withholdings below the statutory requirements unless they have approval from the CRA. The approval of a reduction is not retroactive. If it is not granted before the first pay period for 2015, some periods will not be subject to reduced withholdings.