Why Having Multiple Jobs Can Lead to Tax Pain

For many Canadians, working more than one job is a reality—whether it’s to pay bills, pursue passions, or save for big goals. But when tax season rolls around, those same people are often shocked by how much they owe.

The culprit? Most of the time, it comes down to a simple paperwork mistake: filling out employment forms incorrectly and accidentally claiming the personal exemption (basic personal amount) at more than one job.

The Basics: What’s the Personal Exemption?

Every Canadian is entitled to a “basic personal amount”—a portion of income you can earn tax-free each year. Employers account for this when they calculate how much tax to deduct from your paycheque.

But here’s the catch: you can only claim this exemption once.

The Common Mistake

When you start a new job, your employer will ask you to complete a TD1 form (both federal and provincial). On this form, you check a box to claim the basic personal amount. If you’re working two (or more) jobs and claim this amount with both employers, each company thinks you’re entitled to that tax break.

The result? Both employers under-deduct taxes. Your paycheques look bigger during the year, but at tax time, the CRA catches up. You now owe the shortfall.

Why It Hurts

Let’s say you work two part-time jobs:

• Job A pays you $20,000

• Job B pays you $25,000
  

Each employer, thinking you’re entitled to the full personal exemption, withholds less tax than they should. By the time tax season comes, your total income is $45,000—but not enough tax was taken off. That’s when the surprise tax bill hits.

How to Help Avoid the Pain*

1. Only claim the basic personal amount with one employer. Usually, this is the job where you earn the most.

2. For your second job, mark “NO” to claiming the personal exemption on the TD1. This ensures the employer withholds the correct tax.

3. Use RRSP contributions to your advantage. Even if your TD1s are filled out correctly, working multiple jobs can push you into a higher tax bracket. RRSP contributions reduce your taxable income, potentially lowering your overall bill. Plus, your money grows tax-deferred until retirement, giving you both immediate relief and long-term savings. For those juggling multiple jobs, this can be a smart way to offset unexpected taxes at year-end.

4. Consider requesting extra tax be withheld. If you’re worried, you can always ask an employer to take off a bit more. It’s like a tax safety net.

5. Review your forms annually. Life changes, and so does income. Updating your TD1 helps prevent surprises.
   

The Bottom Line

Having multiple jobs doesn’t have to mean dreading tax season. By carefully filling out your employment forms and only claiming the personal exemption once, you can avoid a painful tax bill and keep more control over your finances.

Think of it this way: A little paperwork upfront saves you from a big headache later.

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⚠️ *Disclaimer

The information above is for general educational purposes only and should not be considered tax advice. Every individual’s tax situation is unique, and factors such as income level, deductions, credits, and personal circumstances may change the outcome. For guidance specific to your situation, please consult a qualified tax professional or accountant.