why do I have to pay back instead of getting a refund? when filing my income tax.?

Question

I am single and no dependents. My preparer told me also that I am in a high tax braquet.

Answer 1

Your employer must not have deducted enough tax from your pay during the year. I know mine doesn't, the only thing that saves me from paying is my RRSP contributions.

See the link below to determine which tax bracket you fall into.

Answer 2

Are you self employed or do you work for someone? Do you have a lot of income like dividends and interest, or is all your income from wages? If all your income is from wages, then your employer is not withholding enough taxes on your paychecks. Use a W-4 to adjust this withholding. If you are earning a lot of income from the sale of stocks, or from interest, then you are paying b/c your income is not being taxed when you earn it. In the end you pay the same amount of taxes, so as long as they're withholding about the correct amount I wouldn't worry about it. It's actually better to pay instead of getting a refund, b/c getting a refund means you overpaid and the government had your money all year. Just make sure you aren't over or under paying too much. If you are underpaying your taxes by too much, the government will charge you interest. There's no penalty for overpaying taxes during the year, and although it may feel good to get a refund back, it's not smart to give them a free loan.

Answer 3

Your employer may not be deducting enough taxes. There are online calculators such as the Ernst & Young Canada site (http://www.ey.com/global/content.nsf/Canada/Tax_-_Calculators_-_Overview).

If you have more than one employer, and you incorrectly fill out your TD-1 form when you start your employment, this would be a good reason why you're not paying enough tax. For example, if you check out this form at http://www.cra-arc.gc.ca/E/pbg/tf/td1/td1-07e.pdf you will see a line on page two which indicates that if you have already claimed the personal tax credits on another employers form, you can waive them with this employer to avoid not paying enough tax.

Basically, if you look at the tax brackets on a site like http://www.taxtips.ca/ you will find that you pay less tax on your income earned within a certain bracket.

If you have two employers, they may both withhold taxes at that low bracket, when really some of that earned income should be taxed at a higher bracket.

For example, if you make $36,378 from one employer, and $36,378 from another employer, each might tax you like that's all you made that year (if you were in Alberta you would have paid $6,347 to each employer, for a total of $12,694 in taxes). Unfortunately, the lowest tax bracket ends at $36,378 so anything above that should be taxed at a higher rate (first $36,378 at 25.25% combined, next $36,378 at 32%, next $36,378 at 36%, etc.). In this example, since you made a total of $72,756 you should pay a total of $17,989 in taxes (Federal and Provincial, using the Alberta rate for simplicity).

Since you only paid $12,694 rather than $17,989 you would have to pay the difference.

Having multiple employers also results in over-contributing to CPP and EI, but you get this back when you file your taxes.

So, to summarize, either they aren't taking enough tax off, you have other sources of income such as other employers or investments putting you into higher tax brackets and not withholding enough tax.

I hope this helps.

Answer 4

Ask for a w-4 form from your HR department and change the amount that your are claming. It's not uncommon to even add an additional amount to the withholding amount if you do not wish to pay next year.