2009 Tax Tips, Part Two

Tax Tip 1 of 20

Are extra payroll deductions the answer to taxes?

Are you savings-challenged? If so, you might think that asking your company’s payroll department to increase your regular income tax deductions is a good strategy to avoid the possibility of extra taxes at year-end. “Not necessarily,” says Chartered Accountant James Kraft, a Certified Financial Planner and Taxation Specialist with PlanningWise Inc. in Toronto. “I first recommend that people seriously assess their own abilities to manage money as well as their goals with respect to savings.” On the “pro” side, Kraft says that increasing payroll deductions can be a forced savings plan. Some may prefer it, because the money never comes into the house and they can’t get their hands on it.