Previous to this year, I’ve only had one year where I owed income tax at the time of filing. It was about ten years ago I think and I owed $60. No big deal. This year, I managed to screw up real big and this month, I paid over $2,000 in taxes owed. I’m still not sure what happened.
I made a marginal amount more money this year compared to last, well short of an extra $10K. Oddly, I only had an extra $500 deducted from my income compared to last year. You’d expect that to scale with income but it didn’t. I wasn’t aware so few dollars were being deducted. To add to my error, I didn’t buy enough RRSPs in proportion to my extra income. I would have had to buy well over another $5K in RRSPs to come out even this year.
All of this added to my folly and I paid dearly this year. I believe mistakes are fine, just as long as you learn from them. So going forward, I will implement new financial checks to help mitigate against what happened in tax year 2018. In January of 2020, I will begin assembling a financial snapshot and see how much I’ve made, how much was deducted, and how many deductions I’m eligible so far. That will give me some leeway to buy RRSPs before the end of February to offset any tax owing. My mistake was doing my taxes in April, when it’s too late to do anything.
What a painful lesson!