Sign up for Mo' Money Monthly. The best of Mo' Money in yo' inbox.

        

Karyn’s September Challenge: Income Tax Time Preperation

My September goal was to finally figure out how much I’m going to owe once tax-time rolls around. This year is going to be a bit different for me as I am currently working as a freelancer under contract. For this challenge I wanted to get the low-down on exactly what percent of each paycheque is going to be going to taxes.

1

Originally I was going to post the grand total of money that would be going towards my taxes, but I decided to just give you the percentage breakdown instead.

For Ontario, I will owe 13 percent of each paycheque for GST/HST. I was able to find this number pretty easily. For those of you reading this that are in Canada you can see how much you will owe on Canada Revenue Agency’s (CRA) website.

If you have yet to get your GST/HST number, check out my April Money Challenge to see the steps I took and why it’s beneficial to have one.

2

It was time to do some deeper research. I went back to my old cheques to see what had been deducted from each payday. I then had to figure out how much would be taken out for Employment Insurance (EI) and the Canadian Pension Plan (CPP).

You’d think it’d be as easy to find the amount for these as it was for the GST/HST, but unfortunately it wasn’t. I couldn’t find a straight answer on the CRA website and whenever I felt like I was closing in on an answer, it became a dead-end. I was finally able to find the employee contribution rate (4.95 percent) for the CPP. It also shows the maximum annual self-employment contribution, but I wanted to see if there was a ballpark percentage, so I decided to call the CRA and get the deets.

I, again, thought it would be a simple phone call with simple answers, but of course not. Why make understanding money easy when you can make it complicated and awful? I just wanted to give up and live in a hole.

3

First I had to jump through hoops to find the right person to talk to. Once I finally finished wrasslin’ with the automated responses I got ahold of a real, live agent. I was repeatedly told to just go to their website and search for the answers there, but I remained persistent. I asked if he could give me the percentage of what I should be taking off each paycheque when it came to the CPP. He could not give me a straight answer and directed me to their Payroll Deduction Online Calculator  (PDOC) to find the answers.

4

Once you get to the site, choose SALARY and input the necessary information that applies to your financial situation. It’s only three steps and will give the amount that you will need to pay for tax time. I can’t give you an exact percentage for the CPP, but the calculator will give you a great estimate!

When it comes to EI the CRA agent told me that you can choose to deduct from your paycheque, but it requires you to set up an account with them. I think I may save that for another Monthly Money Challenge since it’s not entirely necessary.

Now the last thing I want to throw at you is income tax. Income tax is NOT the same as GST/HST. I had no clue and was a tad shocked when the CRA agent mentioned it as another deduction from my pay. For example, the Federal Tax is 15 percent of your annual income if you earn $44,701 per year.

For Provincial Tax, it’s 5.05 percent in Ontario if your annual income is $40,922 (it varies by province). Check here to see what your income tax will be.

In the end I was left slack-jawed from all of the money that I’m going to have to pay, but also thanking my lucky stars that I’m researching this now and saving 40 percent of my paycheque. I highly suggest you get this income tax ball rollin’ ASAP.

For more information you can call the CRA or find a great accountant to help you figure this all out. Just don’t wait until the last-minute because they will be fully booked!

5

Do you have an income tax horror stories? What did you find when figuring out your taxes? #TheSisterpack wants to know so tell us in the comments below!

Good luck and stay #financiallyfab!
-Karyn

Leave a Reply

Your email address will not be published. Required fields are marked *

Comment *