I am in Canada. I am trying to understand if it would be better to pay my taxes all at once at the end of the year or keep them deducted from my pay.

What are the advantages of having them deducted automatically by my employer on each pay? Are there any downsides (or penalties) to paying all at the end?

  • 2
    The end-of-year option is not generally available in Canada... – DJohnM Oct 26 '17 at 5:46
  • @DJohnM That seems like a pretty good reason to pay-as-you-go right there. ;-) – Craig Oct 26 '17 at 6:14
  • 1
    In many (most?) countries, employers are required by law to withhold income tax from wages paid to employees and send the withheld money in timely fashion to the revenue authorities. Sometimes these notions are given fancy acronyms as names such as TDS (Tax Deducted at Source) or PAYE (Pay As You Earn) to help people unfamiliar with the concept get used to it, while in other countries, they are just a fact of life and nobody wonders whether a request for zero withholding will be honored by the employer; it won't. @DJohnM's comment suggests that Canada is the latter kind of country. – Dilip Sarwate Oct 26 '17 at 15:30
  • @DilipSarwate If the end-of-year option is not available in Canada (as suggested by @DJohnM), that means Canada is the first kind of country (where it is required by law that taxes are deducted at source). But, I am not sure it is actually... – Gradient Oct 26 '17 at 16:47
  • You can in fact adjust your withholding but I'm not sure of the consequence at the end of the year (source, I had to determine how much I wanted they withhold when I started my job in February). I'm in Canada Quebec – Rémi Oct 26 '17 at 18:09

There's no downside to paying taxes at the end (unless you have a cash management issue and are "surprised" on the size of the tax due at the end of the year). However, if you are an employee, it is not possible for your employer to not deduct taxes every pay. The only thing you can do as an employee is to ask to deduct less with the form T1213 Request to Reduce Tax Deductions at Source (see http://www.cra-arc.gc.ca/E/pbg/tf/t1213/t1213-16e.pdf).

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