Are you wondering where that strange Canada RIT deposit that recently showed up in your bank account came from? If so, congratulations! You have received a refund from Canada Revenue Agency (CRA) because you overpaid your taxes.
Canada RIT is the abbreviated way to say Canada Refund on Income Tax. The Canada RIT deposit usually shows up a few weeks or months after you have filed your tax returns and after CRA finishes processing it. The deposit is CRA’s way of saying that you overpaid your taxes and that you have more credits and deductions than the amount of tax you owe. Your CRA refund is not taxable income as it is your own money that is being returned to you by CRA.
When are tax refunds deposited?
The answer to this question depends entirely on how and when you filed your tax return. Importantly, a refund can only be made after you have filed your tax return. By failing to file your return, you may be losing out on getting refunds that are properly owed to you by CRA.
According to CRA, individuals filing their taxes online can expected to see a tax refund within 2 weeks. Those who file a paper return should see their refund within 8 weeks. It is important to note that these timelines are only applicable for those returns that are filed on time and that meet the filing deadline. CRA may select some returns for a more thorough review in which case it may take longer for CRA to process the return and issue a refund.
What should you do with your Canada RIT deposit?
While you may be tempted to go on a spending spree with your unexpected riches, you should take stock of your current financial circumstances before making any large purchases. If you have debt such as credit card debt where you are paying a large amount each month in interest payments, you may consider applying some or all of your refund to pay down your credit card debt. It may also make sense to apply some or all of your refund towards your mortgage or other larger loans that you may have.
Alternatively, you may want to invest the money or start an emergency fund to deal with unforeseen expenditures that may come up in the future. The kinds of investments you may wish to consider are endless and range from a simple savings account to a GIC or to put the money into a Tax Free Savings Account (TFSA). If you have unused contribution room in your RRSP’s, you may consider putting your deposit into your RRSP, which will allow you to reduce your taxes for the following year.