Although filing taxes is not very exciting, the expectation of a tax refund no doubt brightens the prospect a bit. For so many people in Canada, this is one of the more anticipated times of the year. Knowing how long it may take to get your tax refund and using smart planning for it can make all the difference in your financial well-being. The following in-depth guide will discuss how long it takes to get a tax refund in Canada, along with some thoughtful advice on the best way to make good use of that extra cash.
Understanding the Tax Refund Process
1. Filing your return: How quickly you get your tax refund is greatly influenced by how and when you file your taxes. The Canada Revenue Agency (CRA) begins processing returns for the prior tax year around the middle of February. Electronic filing could take as short a time as two weeks, while paper filing would take an average of eight weeks.
2. Direct Deposit vs. Cheque: Setting up direct deposit is an easy way to ensure that you get your tax return quicker. You may get your return via direct deposit as quickly as eight working days. If you choose the cheque, be prepared to wait a little longer as the mail system adds time to the whole delivery.
3. Possible delays: A number of factors may delay your refund. These include, but are not limited to, errors on your return, additional review by the CRA, and preparing a return very close to the deadline. To minimize those kinds of possible delays, be sure that your tax return does not have any mistakes, and file well in advance of the April 30 deadline.
Strategic Ways to Spend Your Tax Refund
A tax refund is a chance to improve your financial situation. Here are a few options to consider:
- Pay Down Debt: High-interest debt (like credit card debt) can add up fast. Use your tax return to pay off this kind of debt and you’ll pay less interest and have more room in your budget.
- Build Your Emergency Fund: Most financial planners recommend you have a cushion of 3-6 months of living expenses in case of emergencies. If you fall short, you can add your tax return to it. This fund will be a safety net to help you avoid further financial setbacks if unexpected expenses or loss of income come up.
- Invest in Yourself: Be smart and consider an RRSP or TFSA contribution. These kinds of investments will manage your financial goals long term and in most cases will also reduce your taxable income next year.
- Home Improvements: Money put into home improvements pays off in both the increased value of the property and a better living space. Find energy-efficient upgrades that will lower your utility bills over time.
- Further Education: If you’ve been looking to upskill or further your education, use your tax return for courses or training, and you’ll see your earning potential increase exponentially in the future.
- Charitable Donations: This will help a cause close to your heart and might lower your next year’s tax bill as it’s an income tax credit on the next filing.
Fun Ways to Use Your Tax Refund
It’s great to be practical, but every once in a while, treating yourself doesn’t hurt either. If you have your financial bases covered, here are seven ways to use your tax refund:
- Plan a Vacation: You can use some time to relax and take care of yourself after working so much all year. Travelling, whether to parts of Canada you haven’t seen or another country, can be rewarding in and of itself.
- Upgrade Your Gadgets: If you’ve been wanting a new phone, laptop or any other gadget, using your tax refund for such purchases is totally guilt-free.
- Cultural Stuff: Buy a membership to the local museum, subscribe to a theatre season or go to concerts. It enriches you and the arts community, too.
Coming to the end
Getting a tax refund is like a bonus at the end of the year. Whether you use it to pay off financial priorities or treat yourself, plan ahead and make the most of it. Remember, it’s all about making decisions that fit your financial goals and situation. With planning and smart choices, your tax refund will be a financial and personal win.
Know More: Financial Planning: The Ultimate Guide for Canadians
Know More: 5 Essential Insurance Policies Everyone Should Have in Canada