How I will spend my tax refund

Last Thursday night I geeked out by doing a practice run of my taxes. I don’t have all of my forms yet, but I knew enough to plug in most of the numbers. Turns out, I should be getting back approximately $2,500! Which is a shock to me, because I assumed with all of my freelance work, I would end up having to pay taxes. But, my RRSP contributions and my business expenses helped me out a lot.

Because I consistently contribute to my RRSPs, I’m considering filling out the T1213 form which lets you request permission from the government to have your employer reduce the amount of income tax taken off your pay cheques. If you have childcare expenses, donate to charity, have rental losses, or contribute to your RRSP regularly, you could be eligible to receive more take-home pay on each pay cheque in lieu of a tax refund. That way, you can use all that extra money throughout the year to achieve your financial goals – instead of waiting once a year to get a refund from the interest-free loan you gave to the government!!! I’ve thought about doing this for years, but have never gotten around to it. I know, I’m a bad PF blogger. Has anyone else used this form yet?

Here is what I will be doing with my tax refund:

• $1,000 into Emergency Fund. This will mean that I should hit my 2011 goal of a fully funded EF ($5,000), provided I don’t have to dip into that account for any emergencies. My next goal is to one day have $10,000 in my EF, so going forward, I will contribute $50 bi-weekly until I reach that magical $10k mark.
• $1,000 into Retirement Portfolio. $500 into RRSPs and $500 into TFSA.
• $500 into Travel Fund. This will help me out with upcoming 2011 trips to Toronto/NYC, San Francisco, and tentatively Thailand/Cambodia.

Now, usually I take a little bit of my tax refund to spend on myself. I remember one year I bought a Lululemon hoodie, and last year I spent a bit of it to beef up my work wardrobe (I was just starting a new job). However, because I am on a shopping ban, that’s not going to happen this year. So instead, I earmarked some of the money to go into my Travel Fund, which will be spent on myself anyway in the end – just in a slightly different way.

What are you doing with your tax refund?