Understanding your tax rights and obligations can help keep your tax affairs in good shape, avail you of every relief you’re entitled to and even get you a tax refund. Notwithstanding, one challenge many taxpayers face and may be concerned about is tax overpayment.

You recall that the Canadian tax season for this 2023 tax year commenced on February 20th and will be concluded on April 30th. If you are self-employed, your tax deadline is June 15th 2023.

As a student, you will be required to pay your personal income taxes within the timeline stated above. Although you will be entitled to a tax refund if you overpay your tax liability, some precautions can be taken to avoid excessive taxation so you can save more of your disposable income.

So how do you avoid overpaying your taxes?

1. Know your tax bracket

First, it is important to know the tax bracket your income falls into and calculate based on that threshold. If you earn;

• Up to $50,197 your income is taxed 15%;
• $50,197 to $100,392 is taxed at 20.50%;
• $100,392 to $155,625 is taxed at 26%;
• $155,625 to $221,708 is taxed at 29%;
• Above $221,708 has an applicable tax rate of33%.

2. Don’t miss the deadline for filing your tax return.

It is always advisable to file as early as possible in order to avoid the ‘rush’, mistakes and penalties. Missing the deadline could incur a penalty fee of 5% on the tax debt you owe. Now that’s more money you could save or even spend on other important things.

3. Keep complete financial records

To prevent losing receipts and perhaps missing out on tax deductions, be meticulous in your record-keeping. Scanned receipts can be stored electronically, but also store printed copies in case you are audited. Remember that tax deductions help reduce your taxes owed, thereby saving you more income!

4. Claim Expenses

If you earned over the tax-free allowance of $14,398 for 2022, then you may be able to claim some eligible expenses to reduce your overall tax liability. Examples of such eligible expenses include:

• Tuition fees
• Moving expenses
• Medical expenses (a visit to the doctor, prescriptions, and surgery)
• Donations
• Business expenses (like rent, supplies, travel, and professional fees)

If you are considering using eligible expenses to lower your general tax liability, you will need to have proper documentation handy for each cost before filing for claims. So keep all receipts really safe, because the CRA requires individuals to keep 7 seven years’ worth of records on hand.

5. Invest in RRSPs and TFSAs

Tax-advantaged savings plans are a wise choice for retirement savings and tax reduction. You can protect your investments from taxes with a retirement savings plan (RSP), and you can withdraw money tax-free from a tax-free savings account (TFSA). With the help of a seasoned financial advisor, you can get help in setting up your RRSP and TFSA plans.

There you have it! Now that you know, put these to work today and enjoy some sigh of tax relief! Also don’t forget to reach out to EMCA and get professional advisory services for your tax filing and refunds.