Most Canadians were expecting a refund this year but more than three million taxpayers owed money. A tax bill should not be a surprise.
Once April 30 passes, most people forget about their taxes for another year. It is tempting to just file it away but you should try to introduce a little tax planning into your financial life so next year's return holds no surprises. Especially if it involves a tax bill.
If you are a regular employee, your employer should withhold enough from your paycheque to cover your income tax obligation. But if your situation changes, you should let your payroll department know so they can adjust your tax withholdings. Though it is nice to get a tax refund, remember it is money you have overpaid the government during the year.
So how do you end up owing taxes? There are many reasons but here are some common situations that might result in a tax bill.
If you have two jobs, you may find yourself owing at the end of the year. When your employer calculates your tax withholding, they give you the basic personal exemption amount which is $11,327 for 2015. This is the amount of income you can earn before paying federal income tax. The problem is you only claim the personal exemption once on your tax return. If two employers are using it as part of their calculations you could end up owing a significant amount. If you are working two or more jobs, you should either save some additional funds to cover your tax bill or inform your second or third employer about your situation and ask them to make adjustments to your tax withholdings.
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