Can I get less tax taken off my pay each month?
If your deductions and credits reliably produce a refund, that is exactly what Form T1213 asks for. It is a request to the CRA to authorise your employer, or the payer of your pension, to withhold less at source because the year's deductions and credits will bring the tax back to you anyway. It does not change what you owe for the year. It changes when you hold the money. For someone whose refund arrives every spring without fail, the form is the difference between financing the CRA all year and being paid properly as you go. The request has to be supported, so the deductions need to be predictable rather than hoped for.
Who decides whether my tax at source is reduced?
The CRA does. The form is a request, not an election, and the authorisation is issued to your employer or pension payer rather than to you. Your employer cannot reduce withholding on your say so, and asking payroll first usually wastes a pay cycle. The practical points are sequence and timing. Make the request before the year's pay periods run, because a reduction only affects the pay that is still to come, and a request made late in the year has very little left to work on. Support it properly as well: the CRA is being asked to accept an estimate of deductions that have not happened yet.
Does a foreign tax credit count as a reason to reduce withholding?
It is among the clearest reasons there is, provided it is predictable. The form is aimed at Canadian residents whose deductions and credits, including foreign tax credits and treaty based deductions, will produce a refund in any event. For a cross border employee whose foreign tax is large and certain, Canadian withholding on the same income is money going out and coming back for no purpose. What the request needs is evidence that the credit is reliable rather than merely possible: the foreign employment, the foreign tax being paid through the year, and a calculation showing where the Canadian liability lands once the credit is taken into account.
I get a big refund every year, is that a problem?
It is not a mistake on your return, but it is a cash flow choice you probably did not make deliberately. A large refund means tax was withheld through the year against deductions and credits that were always going to reduce it, and the money sat with the CRA until the return was assessed. Where the deductions are predictable, and cross border deductions and foreign tax credits often are, a request to reduce tax at source puts that money into your pay instead. Nothing about the final position changes. If you would rather take the refund as a lump sum, that is a legitimate preference too.
Does reducing tax at source change how much tax I owe?
No. It changes the timing only. The year's deductions and credits are what they are, and the return still settles the position. What the request does is stop money being withheld that was always going to come back to you. That cuts both ways, which is the thing to be careful about. If the deductions turn out smaller than the estimate the request was based on, the reduced withholding leaves a balance at the end of the year instead of a refund. So the estimate should be conservative, and if circumstances change partway through the year the position should be revisited rather than left running.
Can withholding on pension income be reduced the same way?
Yes. The request covers Canadian employment income and pension income alike, which matters to people whose deductions are predictable but whose income no longer comes from an employer. The test is the same: deductions and credits that will produce a refund anyway, evidenced rather than assumed. For someone drawing a Canadian pension while treaty based deductions or foreign tax credits reduce the Canadian liability, withholding at source can run well ahead of the tax actually due for the year. The authorisation, if it is given, goes to the payer of the pension, who applies it to the payments still to be made.
What counts as foreign income, and what is a foreign tax?
Foreign income is income sourced outside the country you are filing in — where the work was done, where the property sits, where the payer is resident, depending on the type. A foreign tax, for credit purposes, is a levy imposed by another country that functions as an income tax and that you were legally required to pay. Consumption taxes, property taxes and most social contributions are not, however real the cost. Sourcing is decided by rule, not by which bank received it. See the foreign tax credit.
Do American citizens living abroad have to pay taxes?
American expats and green card holders need to file US returns for life, and many of them pay little or no US tax once the relief is applied — but the filing is what unlocks the relief, so the two questions have different answers. The exclusion for foreign earned income, the credit for foreign tax already paid and the treaty between the two countries between them usually leave the total at roughly the higher of the two countries' tax rather than the sum. Skip the return and none of it applies. See Americans abroad.
