Millennials are getting a reputation for job hopping and not staying at one employer for very long. It would not be uncommon for older generations to stay for five years or even their entire career at one employer. However, the generation born between 1982 and 1993 tend to change jobs much more often as they continue to search for the right fit and ultimate satisfaction in a job. In today’s environment of job uncertainty, this might be your strategy, but you should also consider how this could affect your personal tax situation.
Starting With a New Employer
When you start with a new employer during the year, all of your Canadian pension plan and employment insurance contributions reset for the fiscal year. Depending on how much you make, if you were approaching the maximum withholdings for the year, this resets with the new employer. You can get your over contribution back at the end of the year when you file your tax return. However, from a cash flow standpoint, you do not get that incremental pay you might have expected.
If your previous employer had a retirement savings plan, stock purchase plan or other employee benefits plan, make sure you understand what is required when you leave the company. Employers may require you to transfer funds out to your own savings plan or allow you to stay in the current plan. Understand your rights and obligations under the plan, as each one has its own complexities and requirements.
Provide your old employer with your latest address to send your T4 slip at the end of the year and any other documents. To ensure access to all of your T slips, consider registering for a CRA My Account.
Freelance and Consulting
If you are hired on as a consultant or freelancer with your new position, you may be able to deduct some additional expenses incurred during the timeframe that you held the position. These might include transportation, cellular phone and home office expenses. Understand the working arrangements and how you should be invoicing for your work and getting paid. These can be very different from working as an employee, as the employer does not withhold taxes. You are responsible for saving funds and remitting your taxes to the Canada Revenue Agency.
If taking on new employment means that you need to move to a home that is 40 kilometers closer to your new work location than your old home was, you can deduct some of your moving expenses from your taxes. Some of these deductions include reasonable traveling costs, meals, lodging, mover costs, lease cancellation fees, legal fees and the selling costs for your old home, which includes the real estate commissions. In many markets, the real estate commissions can save you thousands of dollars. If you are considering moving to a new home, you might want to hold off and move when you get your new job so you can claim the relevant deductions.