Quote:
Originally Posted by bobbinka
At the end of the year, the total amount of tax you will have to pay is exactly the same regardless of how many jobs you have and how much/little was deducted from you throughout the year. If you make 50k, you get taxed on 50k.
The part that most people don't understand is the Refund/Balance owing at the end of the tax return. This amount primarily depends on 3 things: your taxable income (from above), the tax credits available to you, and the amount of tax deducted from you throughout the year by your employer. If you end up owing money, typically it is because your income increased and/or your employer did not deduct enough taxes. If you end up getting a refund, typically it is because your income decreased and/or your employer deducted too much taxes.
Why does this matter? Because the amount of tax deducted from you per paycheck is based on primarily two things:
1). what you employer thinks you will earn in the year
2). what information you provide to them about your yearly income and tax credits (this is usually done through the TD1 and TD1BC forms you submit to your employer when you first begin working for them)
If you have more than 1 employer and they each think you ONLY work for them, then it is VERY likely that there is too little tax deducted from you throughout the year. As a result, when you go do your taxes, it is also likely you end up with a larger amount outstanding or a smaller refund than you're used to seeing. Although this makes it SEEM like you owe more tax, in reality, you are paying the exact same amount of tax for the year.
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So what you are saying is that tax return I get every year was really my own money!?
EDIT:
Seriously though his explanation is spot on. Tax is a percentage of your total income throughout the year, this is across all different sources. If you work 2 months a year and make 300K in that period your tax rate will be horrifically high because the gov't will assume you are going to work through the entire year at that rate. So they take an average and tax you incrementally as if you are going to make 1.8mil that year. That means that once it comes to your tax return time you get the difference back between the tax rate you were charged as if you were making 1.8mil and your actual income of 300K.