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I've been looking at ways to increase the amount of liquidity that I have on a day-to-day basis, and notice that I have quite a fair amount of my bi-weekly pay cheque going right to taxes that I'm sure I could use in a more productive manner (GIC's, TFSA's, you get the idea) then sitting around.... wherever it is until tax time comes about.

However, what I don't know is whether this is even an option, or if the employer is legally bound to slice off the taxes/CPP/EI right off the top of my pay cheque regardless. I know that if you work on contract, taxes and what not are your responsibility, but can that apply for a permanent employee as well?

Any advice, especially legal links, are most welcomed.

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In Canada, you need to submit a T1213 Form (request to reduce tax deduction as source). Usually you'd submit this with your tax return each year, but it can be submitted any time.

If you find you're getting a lot of money back each year on your taxes (by overpaying throughout the year) you can request the amount that is withheld by reduced by filling out the form and sending it in with proof of your previous few years worth of tax refunds. The CRA will look it over, and if it's approved will provide a letter for you to take to your employer instructing them to reduce your tax withholding. You'll need to do this every year.

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  • Also, keep in mind that TFSAs (and GICs held outside of an RRSP) are not tax deductible, so they won't affect your tax withholding. – Andrew Lewis Aug 2 '11 at 15:11
  • Hmm so they are supposed too. That's unfortunate. I guess using the tax holdback for investments and then paying said tax come April couldn't work too well? And good catch on the TFSA's. That gets rid of one idea. – canadiancreed Aug 2 '11 at 17:42

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