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March 27, 2021

Are tax discounters worth the money you pay?

Many Canadians look forward to a tax refund with eager anticipation. They consider it a tax-free windfall that they can spend without feeling guilty.

We’re so anxious to do so that close to 1 million of us choose to receive our tax refund on the spot, generally paying anywhere from 10 to 15 cents on the dollar for the privilege of having the money loaded on a debit card from places like H&R Block or Money Mart.

Tax discounters are allowed to charge no more than 15 per cent on the first $300 of the refund and five per cent of anything above that.

Most advisors decry the practice, arguing that an instant refund is a dumb way to pay to access your own money and that getting a refund in the first place means you've already provided the government with an interest-free loan.

Instead, they argue, you’d be better off waiting a couple of weeks and then using any refund to pay off debt or get started on some sort of rainy day fund. Better still, organize your affairs more effectively from the outset.

Talk to your employer about subtracting less tax from your pay using form TD1, particularly if you expect to make an RRSP contribution or are likely to be able to transfer some education credits from one of your kids.

By having your employer deduct less, you'll be able to to save and/or use these funds when you need them, instead of having to wait for a spring refund.

Have you used a discounter to get some cash in hand? Was the price worth the convenience? Would you do it again?

By Gordon Powers, MSN Money



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Gordon PowersGordon Powers

A long-time fund company executive, Gordon Powers now heads up the Affinity Group, a financial services consulting firm. Gordon was a personal finance columnist for the Globe & Mail for many years, has taught retirement planning...

Jason BucklandJason Buckland

The modern-day MC Hammer of money, Jason can often be seen spending cash that isn’t his with the efficiency of a Wilt Chamberlain first date. After cutting his teeth as a reporter for the Toronto Sun, he joined the MSN Money team with...