# Why is my tax return so low?



## pal23 (Oct 1, 2012)

Hey I'm wondering If I did my taxes wrong. The only difference is that I worked for temp agencies this year.

Last year I had an total income (150) of $10,212, and my return was $1900. This year my total income is $9000, and my return is only $1200. 

Could this drop in return be because I worked for temp agencies this year? I noticed they only take off about 5% deduction on my payment slips. Line 437 total Income tax deducted is much different between the two years; it was $874 the previous year and is only $221 this year with all the temp work. 

Could this be the reason I'm getting so much less? Or did I do my taxes wrong?


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## Davis (Nov 11, 2014)

So you paid $653 less during the year, and your refund is $700 less. You're asking what happened to the other $47? I can't help you there.


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## Just a Guy (Mar 27, 2012)

Tax returns aren't "free government money". They are the amount you overpaid the government. Your employer takes the tax off before you get paid and sends it to the government. Of course, when you are getting paid, they are guessing at how much your taxes are going to be, and they have a tendency to overestimate, giving the government an intrest free loan until you file your taxes.

Since you worked a number of different jobs, your employers (who just use a formula based on their pay scale) probably estimated lower, giving you more money at the time of your paycheque and less money was sent to the government. 

When you filed your taxes, since you overpaid less, you get less back...the extra money, little as it was, was probably spread out over all your paycheques for the year (so you took home an extra $55/month on average...which was enough to buy a lunch, so you probably missed it). 

You should never hope for a tax refund, all it means is you gave too much to the government. There are some forms you fill out when you start working which determine how much the company withholds for taxes, and that determines your paycheque. You should aim for $0 as a tax return, since that means you paid exactly what you were supposed to, instead of having to wait almost a year for your true pay.


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## Eclectic12 (Oct 20, 2010)

pal23 said:


> ... Line 437 total Income tax deducted is much different between the two years; it was $874 the previous year and is only $221 this year with all the temp work.
> 
> Could this be the reason I'm getting so much less? Or did I do my taxes wrong?


This line being lower would change how everything works out. I would also check that the amount of tax withheld by each agency adds up to this number.


Keep in mind that a refund simply means that when everything is added up, more taxes were paid than was owed. So other sources of credits or deductions being lower will also play into the balance. Examples include less charitable donations or RRSP contributions deducted.

Then too, the Feds or provincial gov't could have tweaked the tax being charged itself.




Just a Guy said:


> .... Of course, when you are getting paid, they are guessing at how much your taxes are going to be, and they have a tendency to overestimate, giving the government an intrest free loan until you file your taxes.


The first part is true ... the part about over-estimation makes it sound like the employer has a choice. AFAICT, CRA sets the rates.

It also ignores that another area that is out of the control of the employer ... which is the actions planned by the employee. Unless a charitable donation or RRSP contribution is through the company plans, there is no way for the employer to do anything about it. It is up to the employee to file a request with CRA to reduce the taxes withheld due to these actions and give the accepted form to the employer. Again, the actual numbers for the reduction come from CRA ... not an employer asking an HR or Benefits employee to dream up the numbers.




Just a Guy said:


> .... Since you worked a number of different jobs, your employers (who just use a formula based on their pay scale) probably estimated lower, giving you more money at the time of your paycheque and less money was sent to the government.


The other thing to watch for with multiple employers is contributing too much to CPP. Typically neither employer knows about the other employer's contributions so that when the tax return reconciles the multiple amounts, one can end up with a refund.




Just a Guy said:


> .... You should aim for $0 as a tax return, since that means you paid exactly what you were supposed to, instead of having to wait almost a year for your true pay.


Unless it is a simple situation ... I am not sure getting to $0 is possible. 

The CRA form to request the reduction of withholding taxes asks for all income that is not subject to withholding taxes. I would have to trace how they use this but investment income fits this and likely means the requested reduction is not going to happen on a dollar for dollar basis.


It is good though to do what one can, especially where there are regular charitable or individual RRSP donations.


Cheers


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## Just a Guy (Mar 27, 2012)

Wasn't trying to lay blame, was just trying to explain the reality of the situation. Most people have no idea what a tax refund means...they think it's a good thing.

Technically, it would be better to have to pay, which I realize few people save enough to cover, but then the government gave you an interest free loan for the year.


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## Eclectic12 (Oct 20, 2010)

Re: Wasn't trying to blame ...

The wording made it sound like the employer was driving the process.


Re: ... it would be better to pay.

This is probably why CRA dictates what has to with held. The employment income is covered off so that likely there isn't too much to come up with, should other sources push one into owing territory.


Cheers


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