One of the most often-quoted financial maxims is that a tax refund is a sign of poor tax planning. That’s because a tax refund is an indication that your clients have loaned their hard-earned money to the government, interest-free, during the past year.

A tax refund typically arises when the amount of tax owing on someone’s tax return is less than the amount of tax withheld from his or her income during the year. Employment income is the most common type of income from which tax is deducted at source and thus employees are most often the ones who get significant tax refunds each year.

The amount of tax an employer withholds is calculated by taking into account certain credits to which the employee is entitled but without taking into account various other deductions and credits often claimed on his or her tax return.

With the start of 2016, here are two ways you may help your clients to eliminate their annual tax refunds:

1. Updating the TD1 Form
When an individual first starts working for an employer, he or she likely completed the Canada Revenue Agency’s (CRA) Form TD1: Personal Tax Credits Return, along with its provincial or territorial equivalent. This form lists the various credits to which an indivdiual is entitled, such as the basic personal amount (the 2016 federal amount is $11,474), the disability amount ($8,001 for 2016) and the spouse or common-law partner amount (maximum of $11,474 less the spouse’s or partner’s estimated net income for 2016).

Let’s say your client got married since he or she first started working and completed the TD1 form. Now is a good time to update the form if his or her spouse’s income for 2016 will be below $11,474.

The updated TD1, along with its provincial or territorial equivalent, should be submitted to the employee’s payroll department as soon as possible so that the employee’s tax deductions at source may be reduced for the balance of 2016.

2. Reducing taxes at source with Form T1213
Similarly, if your clients make regular RRSP contributions other than by direct payroll deduction, there’s an easy way to get the resulting tax refund throughout the year. Simply have these clients complete CRA Form T1213: Request to Reduce Tax Deductions at Source, in which they list the various deductions that they plan to take when they file their 2016 tax returns, such as their RRSP contributions, deductible spousal support payments, interest on money borrowed for investment or business purposes, or childcare expenses.

This form must be mailed to the CRA. Once it’s approved, the employee will receive a formal authorization letter that he or she then submits to the employer’s payroll department, authorizing it to reduce the amount of taxes withheld at source from each remaining paycheque in 2016.

Using one or both of these methods should help keep your clients from being interest-free lenders to the government.