Employed people have less chance of tax savings compared to people who are self-employed.

If you are currently employed, income and benefits from and related to your employment are taxable and you cannot claim any deductions against income from employment, except as specifically allowed by the system.

Here are some tax planning techniques that can lead to tax savings:

• Arrange for non-taxable benefits: There are some non-taxable employment benefits, such as contributions to a registered pension plan, contributions to a group accident or sickness plan, contributions to a private health care plan, everything or part of the cost of free or subsidized school services for your children.

• Request that your source withholdings be reduced whenever possible: In any situation where you expect to receive a refund after filing your return, you should review the form you submit to your employer and seek to reduce source reservations. If you receive a refund, that means the CRA has held your money and paid you no interest for many months. It is best if you can send a check to the CRA at the time of filing so you can use those funds in the meantime.

• Pay the interest owed by the employer before January 30 of the following year:

If you receive a low interest-free loan from your employer, you are considered to have received an employment benefit. The benefit is set at the CRA’s current prescribed interest rate less any interest actually paid during the year or within 30 days after the end of the year. This will provide you with a cash flow advantage.

• Consider employee profit sharing plans for cash flow purposes: there is no source withholding on amounts paid by the plan. Careful timing of employer contributions and plan disbursements can give you better cash flow than a straight bonus payment.

• Transfer retirement allowances to an RRSP – If you transfer the entire retirement allowance to an RRSP, legal fees will never be deductible. When you withdraw payments from the RRSP, they are no longer considered a retirement allowance.

• Claim the payroll tax credit to help cover your work-related expenses – Employees can claim a 15% tax credit to help cover their work-related expenses.

• Employed tradesmen can claim deduction for cost of new tools – If you are an employed tradesman and must use your own tools on the job, you can deduct part of the cost of new tools.

• You can claim reimbursement for GST / HST paid in deductible expenses from your earned income.