# Bonus check monthly. How to avoid taxes.



## madeincanada2013 (Jul 22, 2013)

I received my monthly bonus check of $1000 but after taxes which I believe is marginal tax bracket it took a hefty amount off my bonus check, and the marginal tax is of course so much more than the income tax. Now my question is that how do I avoid paying this marginal tax on these monthly bonus check. I've done some research and read on this same forums and others and these are some of the answers I've found.

1. You can ask your work to deposit it into your personal rrsp account.
2. Ask your company if you are able to use the $1000 bonus to buy some merchandise to avoid the taxes all together.

Although the two options mentioned above depends on the company, but does anyone know how each process works.

Thanks.


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## Eclectic12 (Oct 20, 2010)

For option 1 - some of the companies I've worked for have offered the option to contribute overtime to the company Group RRSP plan. That way, instead of the taxes reducing the payout, the full $$ are contributed. The process was to tick a box to indicate the OT was to be paid to the group RRSP, which resulted in no income tax being deducted.

For my personal RRSP, they would have paid the OT after deducting the taxes as they did not offer a way to get the full $$ into a personal RRSP. YMMV according to company. 

With lead time, I believe one could file a T1213 "Request to reduce tax deductions at source" - which should result in the full $ going into your personal RRSP, even if the company does not offer the option.


I don't believe option #2 will work as the money is being paid, regardless of what it is used for and CRA will want their share. Now if the merchandise is discounted more than the income taxes, the net might be to one's benefit. But I have no experience with this option.


Cheers


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## fraser (May 15, 2010)

Other than arranging for a direct deposit into your RSP account, I think that you are stuck.

The company is obliged to calculate income tax on the value of (benefit) goods and services that are provided to you over a nominal amount. I worked for a company that often provided items as incentives. They always calculated the tax and paid that for us. A number of times we had expensive international vacations than included spouses. The ees portion was classified as business however we did get t4'd for the value of the spouse's portion.


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## Eclectic12 (Oct 20, 2010)

fraser said:


> Other than arranging for a direct deposit into your RSP account, I think that you are stuck ...


+1.

Though as mentioned, if the company says they only do an after-tax person RSP deposit, the T1213 can help get around this.

The main reason I didn't use it for OT where I did not like the Group RRSP options was that the OT as well as the income tax varied a lot, year by year. I suppose another possibility is to get the money into the Group RRSP and then transfer it over to the personal RRSP.


Another thing to keep in mind is that there is no free lunch here. 
If the pre-tax dollars are going into any RRSP (Group or Personal), if I recall correctly box 52 Pension Adjustment on the T4 form will be used on the tax return filed to reduce the RRSP room earned by the amount contributed to the RRSP during the year.


Cheers


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## nathan79 (Feb 21, 2011)

1. Seems like the easiest option, but even if it's not possible I wouldn't worry too much about paying the taxes. If you overpay taxes, you'll get a refund later anyway. Just make sure you put $12000 in your RRSP over the course of the year and you'll get back all the tax.


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## NorthKC (Apr 1, 2013)

And of course, plug in that refund into the TFSA and/or mortgage prepayment. Win-win-win


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## madeincanada2013 (Jul 22, 2013)

Thanks so much everyone for sharing your knowledge and experiences. I am a bit more clear on which option I should take.


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