40 per cent of Canadians rely on their tax refund to survive, Torontonians react, and an expert explains the issue

What to know

A new study finds 40 per cent of Canadians rely on their tax refund to survive, as inflation and rising costs of living turn what was once an annual bonus into a financial lifeline.

Torontonians react with disappointment but little surprise, with some depending on refunds to pay off debt and cover basic expenses.

While the federal minimum wage is set to rise to $18.15 on April 1, residents say the increase is not enough to keep up with the growing cost of shelter, goods, and everyday life.

A recent study revealed 40 per cent of Canadians are relying on their tax refund to help cover rising cost-of-living expenses this year, and Torontonians are disappointed but not surprised by the new reality.

Conducted by software company TurboTax, spokesperson and CPA Stefanie Ricchio explained that tax refunds are received by first filing your taxes. After entering your sources of income, deductions and non-refundable tax credits, “If in that year, you ended up in a situation where you paid more in tax for the year than you technically should have because of your deductions and your credits, then the CRA issues you a tax refund.” On the other hand, if you didn’t pay enough tax on earned income, you would owe taxes. 

What once felt like an annual bonus is now the last hope for Canadians to get by amid inflation and high living costs.

Now Toronto went outside to ask Torontonians about their thoughts on the statistics and their experience with tax refunds.

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Toronto resident Diana said she wasn’t surprised, because she was also relying on that this year. “Unfortunately, I will not be getting a tax refund… I guess I owe more than I thought that I owe,” she said.

Without this refund, she explained that she needs to “make some loud, big cuts.” She was also relying on the tax refund to pay off her credit card, which has now prolonged that process.

The federal government will raise the minimum wage to $18.15 starting April 1 to keep up with inflation, but Diana jokes that she’s not an economist, but “if we’re going to use minimum wage as the baseline of what’s required to survive, then it definitely needs to be raised.”

Ricchio recommended to Diana to find out as early as you can how much you owe to be able to put money aside to make the payments. She added, “Even if you can’t make the full payment, you want to file, so that at least you don’t get hit with a late filing penalty.” She explained, “So even if you put down 25 per cent of the amount you owe, it’ll reduce your interest.” 

And Diana’s not alone in this, TurboTax data shows that 69 per cent of Canadians that were surveyed say that they would be financially impacted if they don’t receive their expected tax refund this year. 

Rommel, another Torontonian, said it is unfortunate Canadians must depend on tax refunds to survive.

For him, a tax refund helps extend the reach of his spending, but it shouldn’t be a necessity for survival. “It’s really unbudgeted and you’re not able to forecast your spending for that,” he added.

​Rommel believes the new minimum wage might help, but not enough. “Inflation is increasing and it’s not commensurate with the increase. It’s not catching up like the rising cost of shelter, as well as goods and other costs.”

Once receiving the tax refund, Ricchio recommends using it to pay off debt, saving it into an emergency fund. 

In the past, the refund would be used almost as a “bonus,” Ricchio explained. “I would hear a lot more of, “I’m going to use this to go on vacation, I’m going to use this to do a little something around the house or I’m gonna buy myself something that I’ve been waiting to buy on.” Now, Ricchio explains people use it as a necessity because of the climate the economy is in right now. 

To maximize the initial tax refund amount, Ricchio recommends filing on time. TurboTax data showed that their users 25 and under get an average refund of $4,822. For other age brackets, refunds can also be associated to the Canada groceries and essentials rebate, Canada’s child benefit, and to keep in count if you’ve done charitable donations or paid for medical expenses out-of-pocket. 

“All of these little things can add up, even if it’s just a few hundreds to put into, back into your your tax situation, either to reduce a balance owing or to increase a refund that’s coming your way,” Ricchio said. 

But these statistics don’t surprise Torontonian Santiago. “It’s honestly sad because you should not be relying on tax refunds… Your salary should be enough for you to survive, so that is concerning.”

Santiago adds that Canada has one of the highest inflation rates among G7 countries and calls on the government to investigate. “It’s always nice to have [tax refunds], but you should not be needing that to survive. So there’s always an imbalance, probably, in costing the city against wages.”

Ricchio added, “We’re somewhat at the mercy of the cost of groceries and the cost of fuel… There’s not a lot we can do about that. So look for the areas within your expenses that you do have some control, like unnecessary subscriptions or eating out of home too much. 

She recommends looking at the numbers of what you’re spending on a monthly basis and figure out what spending you can pull back on. 

But Toronto resident Jun gives tough love to Torontonians who rely on their tax refunds. “I feel like [tax refunds] belong to [me], so I’ll just get it later. Affordability is a big issue here, so people need to learn how to use their money in a smart way.” He added, “It’s tough. Life is tough.”