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It is that time of year when taxpayers cross their fingers and hope for a tax refund.

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Canada Revenue Agency (CRA) data for the 2026 tax-filing season through April 20 show about 62 per cent of tax returns filed resulted in a refund. The average refund was about $2,248. Taxpayers with a balance owed an average of $5,775.

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Self-employed taxpayers, landlords and investors with non-registered investment accounts are more likely to owe tax. But a surprising category for chronic CRA debtors on April 30 is retirees.

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Withholding tax

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Most Canadian workers are employees. During your working years, you receive a salary with payroll withholding tax. The tax withheld should result in neither tax owing nor a tax refund at year-end if you have no tax deductions or tax credits.

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However, taxpayers tend to have both deductions and credits to claim. Contributions to a registered retirement savings plan (RRSP) or costs for child-care expenses are generally deductible and lead to refunds. Tax savings also result from donations as well as medical expenses beyond a minimum threshold.

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When an employee transitions to retirement, the tax situation changes. With no employer to withhold an amount that can reduce taxes owed, and fewer credits and deductions, retirees can face a bigger amount owing than they are used to. Depending on sources of income, retirees can consider different tax strategies. Here are a few common income sources and what to expect.

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Pensions

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Pensions are like salary in that there are payroll tables that payors are required to use to determine withholding tax. As a result, pensioners receive a deposit to their account of the net pension after tax.

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If a retiree has only defined benefit pension income from a single employer, he or she may be tax-neutral at year-end. Most have other sources of income, however, and this tends to change the tax outcome.

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Canada Pension Plan (CPP) and Old Age Security (OAS) pensions, for example, have no required withholding tax. When you fill out your application with Service Canada, you can elect to have tax withheld. Most retirees see this section on the form and think, ‘Why would I want the government to take tax off my pension?’

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When you file your tax return, your CPP and OAS is fully taxable income reported on T4A(P) and T4A(OAS) tax slips. If you receive CPP and OAS in addition to a workplace pension, it is likely you will owe tax when you file.

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However, if you elect to have tax withheld when you apply for CPP and OAS, federal income tax will be deducted from your monthly payments, preventing a big tax bill when you file your return.