Once a year you’re actually happy to receive a letter from the government—your long-awaited income tax refund. Here's hoping there's good news inside that envelope.
The government is a strange animal. For them, the last day of the year isn't December 31st, but rather April 30th. To celebrate, they make every single person file an income tax return — talk about a pain-inflicting celebration — and then they choose a select few, hopefully you included, to whom they send a springtime cheque. The aforementioned Christmas in May.
No offence, but the government doesn't give out random gifts. If money was deposited in your account (or sent to you by cheque, if your favourite music group is still the Beach Boys), there is a good reason why. On every paycheque received over the year, your employer was obliged to deduct an amount for provincial and federal income tax, for the Quebec Parental Insurance Plan, for the Quebec Pension Plan, etc. At the end of the year, it may well turn out that too much was deducted (a complicated calculation based on your actual revenue earned), and they give you back the surplus. Think of it more as a pleasant surprise than a present.
Let's say you make $50,000 a year. Your employer uses that amount to calculate how much income tax is deducted from your pay. However, there are a multitude of factors which can lower your taxable income: tax credits, income deductions, RRSP contributions, and so on. For example, if you contribute $4,000 to your RRSP, your taxable income decreases from $50,000 to $46,000, and therefore you owe less tax than what was deducted. It is not up to your employer to keep track of your RRSP contributions, unless of course you ask them to subtract your contributions from your pay all year long. In that case, they should deduct the correct amount, and your RRSP contributions shouldn't create a tax refund.
The refund you got can be attributed to many things other than RRSPs. All the tuition fees you paid while in school can accumulate as deductions in your tax account and yield some serious refunds when you finally have an income high enough to make sense claiming them. The government also reimburses a portion of medical expenses, everything from your root canal to your newest pair of glasses. Take the bus? Have a kid? There are deductions for public transit users and for daycare fees. Everything under the sun seems to have its own deduction.
You can always ask Revenu Quebec to receive your refund before your tax return is processed; it's called an “accelerated refund . ” But watch out! If it turns out that they refunded you too much money, you'll be the one signing the cheque in May.
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