A majority of Canadians see their tax refund as a “windfall of unexpected money,” according to a CIBC poll.
The poll found that 52 per cent of respondents expect to get a tax refund in 2019. A further 63 per cent of respondents view the money as a bonus, rather than their own money being paid back to them.
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But CIBC’s managing director of tax and estate planning, Jamie Golombek, says a large tax return isn’t always a win, but rather a sign of “poor tax planning.”
“Canadians love their tax refunds and at this time of year many people are filled with ‘intaxication’ – a term I use to describe the short-term euphoria of getting a tax refund that fades when you realize you’re getting your own money back,” Golombek said in a release.
“A better plan is to ensure your portfolio operates as tax-efficiently as possible to keep more of your money throughout the year.”
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Kit Yarrow, a consumer psychologist from Golden Gate University, agreed.
“Ideally everybody would be getting a minimal tax refund and keeping their money throughout the year in an interest-bearing account,” she told Global News.
But she said it’s important to make a plan for the extra money you get each month.
“It [could] be such a a small amount of money per paycheck that unless you set up some sort of a savings plan for it, it could easily slip into the rest of your budget,” Yarrow said.
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And just because the majority of people get a large tax refund, that doesn’t mean everyone should do it.
Unless someone is excessively bad with money, there are many online or automatic programs that can help someone save money in this day and age, Yarrow explained.
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The CIBC poll also found that 20 per cent of respondents used the refund for paying down debt including credit cards and loans. Another 20 per cent said it would cover everyday expenses.
Twelve per cent of respondents said they would invest their return.
Another 22 per cent said they didn’t know what they would do with the money.
Yarrow said in her research she’s found that people spend a “windfall” in different ways than if they believe they had earned that money themselves.
“Emotionally what it can feel like is a gift. And people tend to spend gifts a little bit more frivolously than they do their own money,” Yarrow said.
The poll, commissioned by CIBC, surveyed 1,516 random Canadians who are part of the Maru Voice Canada panel between March 22-24. It is accurate to +/- 2.5 per cent, 19 times out of 20.