Stop giving the government an interest free loan (T1213)


I used to rejoice every April when I got my big fat tax refund back from the good folks at the Government of Canada. The money was like a windfall, a treat, a big juicy pay day. My refunds usually amounted to upwards $4800 since I maxed out my retirement savings plan (RRSP) every year. So you can understand why I always looked forward to tax season.

Three years ago I changed my tune about large tax refunds. When I did some simple math, I found both my “better half” and I were owed a combined $8200 from the govvies for a single tax year. WOAH. As a couple, that is exactly $683.33 less bucks a month we had in our savings accounts, earning interest for us. I then did some more math and calculated how much compound interest we didn’t realize. Here are some quick numbers illustrating how $683 bucks adds up when saved every month for three years at 4% interest:

By overpaying in taxes and giving the government an interest free loan, my “better half” and I lost out on hundreds of dollars in interest each year. Grumble grumble. Now don’t get me wrong, I happen to like the Government of Canada, but to just give them my money for free is nuts. So I started poking around and found a wonderful form which reduces the amount of tax I overpay every month, and thus reduces my interest free loan to the government. The form is called T1213 – Request to Reduce Tax Deductions at Source, and it is really handy for those who have the following deductions:

  • RRSP Contributions
  • Childcare Expenses
  • Support Payments

The form itself is really straight forward. You basically just outline all deductions or non-refundable tax credits for the current tax year and submit it to your local CRA office. I should mention this form works best when submitted early in the year (like now). For those with RRSPs, here’s what you need to do:

1. Choose from the following RRSP contribution options:

  • Set-up a Pre-Authorized Contribution (PAC) plan with your RRSP investment company showing the amount you will regularly contribute. OR
  • Make a lump sum contribution to your RRSP.

2. Once the contribution option is setup, be sure to photocopy the PAC or RRSP receipts from your investment company.
3. Fill out form T1213- Request to Reduce Tax Deductions at Source (from the CRA’s website).
4. Mail your photocopied contribution receipts and T1213 form to your CRA office. In my experience, it takes the CRA anywhere from 2-6 weeks to approve your request.
5. Submit the CRA’s approval form to your payroll administrator at work.
6. Smile, you’re next paycheck is a little bigger and you no longer lend the CRA your hard-earned money for free.

I am currently waiting for the CRA to send my approval. I’ll let you know how it goes. 🙂



  1. Thomas January 30, 2008 at 12:14 pm

    Good tip! Thanks!

  2. […] tells us Stop Giving The Government an Interest-Free Loan! Adjust your withholding. A big tax refund is basically a loan for a year the government […]

  3. Derek May 30, 2008 at 12:19 pm

    This is a great post. I told friends about this (i have done the RRSP at source for a few years) and they stare at me blankly?

    Why should the government get a free loan? Do they offer this to us?


  4. Kerry May 30, 2008 at 12:27 pm

    @Derek I wrote this post due to the endless blank stares my friends would give me. I’ve used form T1213 now for 3 years to great success. Thanks for the email as well. 🙂

  5. Felix July 18, 2008 at 6:15 am

    It’s almost end of july and I want to submit a T1213 form for the rest of 2008. How long does it take for them to process usually if I just drop it off at the tax center?

    Is it possible for me to:

    1) Submit the T1213 with proof that i contributed one huge lump sum of money (Initial RRSP account opening) using EFT transfers (maxing out my RRSP deduction limit for 2008) to a RRSP account this month (July) and they’ll figure out how to deduct taxes from each paycheque for the rest of the year


    2) Use EFT from my Bank to the RRSP Account and have some sort of print out / proof of that to show I am contributing regularly (monthly or whatever)


  6. […] amount of income tax off your paycheque every month, instead of waiting all year for your refund.  Squawkfox gives step-by-step instructions on how to use this form (it’s easy) and also shows just how […]

  7. How to Live in Canada February 5, 2009 at 12:03 pm

    That’s great! I’ve downloaded the form and I am in the process of sending to CRA.


  8. Jill Mann November 9, 2009 at 6:31 pm

    My husband always said to pay as little taxes as you can during the year and always pay them on time. We pay the government only what we have to and at the end of the year we always owe some amount of money.

  9. Steve March 1, 2011 at 4:10 pm

    Do you get a tax bill at the end of the year? Or do they just take what they need and leave it at that?

  10. 5 Tips for Stuffing Your Savings November 29, 2011 at 7:34 pm

    […] life, but the reality is that you should aim to break even at tax time. You are essentially providing the government with an interest free loan when you pay too much in taxes each year. It is advisable to adjust your withholdings accordingly […]

  11. Lindsay March 4, 2012 at 1:12 pm

    Hi Kerry, this is a great tip.

    Kindly clarify how I can identify the amount I would want to reduce my tax deductions at source by so that I won’t get a large income tax return nor will I pay a lot back to the government. It is just based on your average income tax return? Or how much you are currently taxed on your income? Do you have to take into consideration how much you are contributing to your RRSP that year?

    Thank you,

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