"I need to make more money but if I get a second job, it will ALL go to taxes."
The above statement is a common misconception with most individuals. In Canada, we do not have a 100% tax rate so having a second job will never result in ALL of your wages from a second job going to tax.
Let me explain. When you start a new job, you are required to fill out payroll tax forms known as the TD1 and TD1BC (this is for BC; each province has their own). These forms are use to complete the tax credits you are eligible for which is then used to determine how much tax your employer should be withholding from each paycheque. What often happens is that most don’t understand what tax credits they are eligible for so the forms are completed but often without proper tax advice.
Let’s assume you are eligible for the basic personal amount only, currently $14,398. When you have two jobs and you complete the payroll tax form for each employer, you are saying you are eligible for the basic tax credit multiple times which means you are doubling up on the tax credits. Neither employer would be aware of what each other is deducting in payroll taxes so when it comes time to do your taxes, neither employer would have withheld the right amount of tax which was based on the information you provided them. This, of course, then results in not enough taxes being withheld and a balance owing when you file your taxes.
It’s really important not to claim these credits twice because when you double up, you are saying you shouldn’t pay tax on $28,796 when you should actually be paying tax on anything over $14,398. When you have more than one employer, make sure you are claiming the credits with one employer only so you avoid being caught off guard with a tax balance.
Have a question? Email or call us. And remember to check out our blogs, checklists and social media pages for more information on all things small business, tax, accounting and the Tri-Cities community.
***This blog is for information only and not to be used as tax advice or planning without first seeking professional advice. Information is subject to change without notice.