Save. Spend. Splurge.

Doing your taxes: Myths, Reality Checks, and How soon to send them

There was a little discussion happening on Twitter (@saverspender) that I thought perhaps the rest of you might like to be interested in listening in on, post-tweet.


A common misconception out there is that if you move up an income tax bracket, you’ll lose all your money to the government. I can’t begin to tell you just how silly that is.

V touched on that in her post Myth!: Working overtime isn’t worth it, and just recently, a conversation between The Asian Pear, Financial Uproar and Vanessa transpired:


Once and for all, I’d like to show you a little chart that I whipped up comparing taxes from one tax bracket to another.

Canada and Ontario Federal income Tax Rates and Brackets



Above chart was created based on the information provided on the Canada Revenue Agency (CRA)’s website for 2013.

If we look at the total combined taxes of Canada and Ontario this is what it looks like:



Jumping up $10,000 each time to the new tax bracket, brings you more absolute taxes, but the simple fact of the matter is you are still making $7134 – $5659 MORE MONEY overall.

If you went from making $50K to $100K, you’d be pulling in an additional total of $39,292 NET a year.

If you decide to also max out your RRSP (Registered Retirement Savings Plan) contributions (calculated at 18% of your income), you can lower those taxes even more.

Anyway, the grand takeaway is:

If you make more money, even though you will pay more taxes, you still MAKE MORE MONEY overall.

I never, ever want to hear any kind of ridiculousness about not wanting to make more money because the government will take it all in taxes.

NEVER. You hear me? NEVER!!!!! 🙂


Taxes in general have never really bothered me mentally.

Sure, it sucks when I have to pay taxes and I could keep the money instead, but when I earned that gross income, I knew that part of it wasn’t mine to keep, anyway.

The alternative would be any of the following 3 major things for me:

  1. Not having street lights and a safe environment with police officers and the like
  2. Having EVEN WORSE potholes and nasty roads to drive on during our snow-filled winters
  3. Not having universal healthcare — a BIG advantage that we Canadians don’t fully appreciate

..among all the social programs, parks that need to be kept clean and save for families and so on.

So unless you’ve been living in Montreal for the past while, where they’ve had to deal with corruption, paying your taxes is something that keeps a country going, and a city properly kept.



Just look at Greece — it is a well-known secret that their citizens didn’t pay taxes for years, and STILL don’t think they have to.

They thought ANYONE who paid income tax was a donkey, and they were proud to be tax evaders as a community and culture.

Look where they are now.

I have always found it a touch sad that such a great civilization that brought us democracy among other great ideas that are still in effect today in modern societies all over the world, could be reduced to… whatever you choose to call them today.

There are certainly plenty of tax evaders all over, not just in Greece, but even though I don’t LOVE paying more money, but I do it because I know where it goes (in general).

I’d rather have a properly-run country than to take the short-term gains by cheating the government each year and end up in retirement, wondering what the hell happened to the country I have to live in for my golden years.

Plus, I have had a healthy fear of authority ingrained into me ever since I was a little kid, and I am honest to a fault, even to my detriment at times.



  • Ally Canada
  • ING Direct Canada (referral code 32726976S1 to get $25)
  • TD Canada Trust
  • Questrade Canada (referral code o0soehds to get $50 in free trades)
  • (I don’t have a T4 because I’m self-employed and I take a salary in dividends)

I hate waiting for them to come in because I’m impatient.

I wish I could just get the preliminary look at them online, and then they can mail the official pieces of paper for my records whenever they want, even if it’s past the deadline for taxes, because I always file online anyway.


Sometimes I can’t wait for all my tax slips and I am too eager to start figuring out what I owe, so I put the max, or more than what I earned.

I never get a refund any more, and I’m one of those freaks that likes to have things squared away early.

Old-Fashioned Way: Pen and Paper

Ever since I started making an income to declare (age 7), I’ve been doing my own (simple) taxes by pen and paper with the help of my parents reading out the forms to me.

As I got older, it became a habit.

It’s a good practice for kids to learn how taxes work, and it erases any fear of doing them — they really aren’t as hard as you might imagine. Just as it is with personal finance, it’s basic addition, subtraction, division and multiplication.

Then I switched to a software sometime in 2009 after years of paper, and never looked back.

It’s just so much easier, and well worth the money to me.

Free Canadian tax software: Studio Tax . com (not .ca!)

I tried using them this year, but they are too simple for me.

If you’re a student, or just have simple wage-related taxes, I suggest Studio Tax as a free electronic way to do them versus using a pen and paper.


  • Free
  • Simple to use
  • Looks reputable


  • Doesn’t have everything for the more complex filer (a.k.a. me)
  • Needs a PC to install, may be a problem for those of you with Macs
  • Have to learn how to convert it into a “.tax” file to be able to file it with the CRA

(♥ to geekymath for pointing out this software to me on Twitter)

Paid Canadian tax software: UFile  — $20

I just chose them at random and have stuck with them year after year so that when I go to do my taxes for the next year, I just upload the file from the previous tax year and everything copies in.

I buy the software, split the cost with my siblings, and after I install it on my computer, I hand the CD to them so they can install it too.

You can do up to 8 tax returns with one CD.

So find 7 friends and you’ll end up only paying $2.49 each, before taxes.

I like using a software because it’s easy to do, and when you enter a figure that needs to go elsewhere, the system automatically does it for you.

Plus, you can play around with your credits to see whether you should hold on to them for a tax year where they have the most benefit in reducing your taxes, or use them immediately.

Sometimes it makes suggestions as well.

In other tax-related awesomeness, Timeless Finance for his 1-year anniversary is giving away $250 cash or TurboTax to Canadians in this giveaway post here. Ends on Valentine’s Day 2013.


If I get a refund (or don’t owe anything), those taxes get filed at the earliest damn moment possible. I want my money I’ve been lending to the government for so long, all the way back!

I haven’t had a refund in ages.

The last refund I got was right after college and my tuition credits kicked in something fierce and lowered my taxes significantly.

If I have to pay, I wait until the very, very, last minute (a week before the deadline), and use their money loan-free as long as possible until I have to fork it over.

I e-file, and I pay online, so I only have to do it about a week before the deadline to ensure I don’t actually miss the deadline (takes about 2 days for things to process).



  • Vanessa

    This –> It’s a good practice for kids to learn how taxes work, and it erases any
    fear of doing them — they really aren’t as hard as you might imagine.
    Just as it is with personal finance, it’s basic addition, subtraction,
    division and multiplication.

    I always tell people to just do their taxes by hand ONE time to see how it works (how income is multiplied over here, taxes owing is calculated over there) before they argue that “you pay more in taxes if you work more”

  • Michi86

    Thank you! Every year with my BF it’s the same damn thing. After I prep his taxes he tells me I must have made a mistake because it’s higher than last year. I then explain to him he did more 1099 work, got more side jobs (he’s a carpenter) and therefore must pay more taxes. It’s a good thing! You made more money dude!

    I use Turbotax to do taxes and I find it fairly simple although I was a CPA (I no longer maintain my license) albeit not a tax specialist, more of a financial statement audit focus.

    I hate whining about taxes in general although yes we do need to consider who to vote for etc and public policy and all that. It’s right up there with the NYCers who are whining how poor they are even though they make $300K/year. (I do realize how expensive it is to live in NYC but for most of these people it’s a choice. I understand by living in Hawaii my ratio of salary to cost of living is less than in other states but I don’t complain because I’m not handcuffed to a palm tree. I can leave at any time.)

  • Angela

    I am happy to pay taxes but last year my husband and I paid over &95,000 in TAXES and I don’t think we receive benefits from the govt of the amount. We get our T4 and the say ‘oh, that’s where the money went’

    After we pay our mtg, cars, daycare, Go train, we scrimp to the next payday. Is ridiculous

    • Mochi & Macarons

      So that means combined you make well over over $500,000? (Assuming you live in Toronto)

      $95,000 is a lot to pay in taxes. Do you use an accountant? Maybe you’re missing some benefits or deductions??

  • Catherine

    hahah I love this! I had this exact argument with a friend recently…she still didn’t believe me…I am going to show her this post since you broke it down so perfectly. I don’t mind paying for taxes, especially for universal healthcare and especially since having a baby in canada. I was able to be hospitalized for a week with my emergency c/section, receiving top notch care in my private room with my own nursing staff…at the end of the week I was presented for a bill of $60.00 for the satellite TV channels my husband insisted on having because the Stanley cup play offs were on…and this bill was covered under my private insurance. I pay less in taxes every year than some Americans pay for the birth of one child….

    • Mochi & Macarons

      PLEASE DO. Print it if you have to. It drives me nuts when people don’t know how tiered tax systems work.

      I’d agree with getting private insurance as well if you don’t have it normally via work. It makes sense.

      • dunny

        @Anne @ Unique Gifter: @Mochi & Macarons:
        I agree with the frustration. I try to avoid these discussions, they never believe me anyway. Have you ever tried to tell somebody that sales tax is a regressive tax?
        I agree that paying more tax just means you make more money. However, there is a tipping point for retirees like me, where your OA pension and Age Credit start to be clawed back, so it is more of a concern.
        By the way, you can file your tax return early, and then pay what you owe just before the deadline. By filing ahead, you avoid any potential online jams.

  • Anne @ Unique Gifter

    Feel free to also go on ad nauseum about how when you’re in a higher tax bracket it’s only on the MARGINAL dollars, it doesn’t increase your taxes on the first 10K, etc. *sigh* I cannot believe how few people understand that we have a progressive taxation system.
    I also hate it when people B*tch about taxes and then draw heavily on social programs. One of my favourite sayings is “social programs cost money.” Ahem. There’s one local business owner in particular, who I know started their business using a program that allows you to draw EI for the first year of your start up. Seriously, you’re whining to me about the cost of taxes (for your business, which you get back as input credits!!!!!!!!) WHILE living off of government money. /rant, though I could go on and on

    • Mochi & Macarons

      It boggles my mind too, but people can’t wrap their heads around tiers, which seems to be an issue for them.

      Maybe the government should just list out the gross income and taxes beside them for every single “tier” within 100 dollars, the way the U.S. does.

      They have this HUGE tax table where you look up your taxable income instead of calculating it, and input whatever tax pops up there.

      Those people usually get an earful from me especially when you drily point out the irrationality of whining about something you benefited from directly.

  • Bridget

    I’m having a hard time adjusting to paying thousands of dollars but honestly it just really motivates me to get into the highest income tax bracket and then I’ll be like, “haha! Made it! It can’t get any worse now!”

  • PK

    I hate taxes, yes, but recognize that they are going to happen no matter how hard I try to stare them down. I wish we had a Government employee for all the cash we send!

    Still, didn’t we discuss this at the Great PF Blogger Conclave? If you don’t know the difference between average tax rates and marginal tax rates you have to turn in your PF Card?

    • Mochi & Macarons

      I wasn’t there at the GPFBC, but I’d assume everyone who professes to love personal finance, HAS to know about marginal tax rates.

      I personally am trying to reach those who are wary converts… 🙂

    • Mochi & Macarons

      I wish we had a listing of exactly how what percentage based on the taxes we pay, goes to each public item — e.g. You paid $5.67 towards the Parks.
      I didn’t go. 🙂 but I’m pretty sure PF bloggers are a small percentage of the general population, and we tend to already know how to do our taxes and save money.
      It is the new converts I am hoping to reach!!

Post a comment

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