ELI5 summary
Why refunds happen
Payroll withholding is calculated from your pay, your TD1 forms and standard assumptions. It does not know you will make RRSP contributions, so it withholds tax on income that will later be deducted. The difference comes back as a refund after you file.
Worked example
Chris lives in Ontario, earns $80,000 and contributes $500 a month to an RRSP on his own, $6,000 for the year. The deduction lowers his 2026 tax by about $1,779. Without doing anything, he gets that back as part of a refund in spring 2027. With a T1213 approval, his employer withholds about $148 less each month instead, and the money is in his hands, or invested, up to fifteen months sooner.
Route 1: contribute through payroll
If your employer offers a group RRSP or will send part of your pay directly to your RRSP, the employer can usually reduce the tax withheld on that part of your pay automatically, because it knows the contribution is being made and is deductible. There is no form to file. Check your pay stub: tax withheld should be lower than it would be without the contribution.
Group RRSP contributions, including any employer match, use your own RRSP room. Keep track of them if you also contribute elsewhere, so you do not go over your limit. See pension adjustments and group plans.
Route 2: Form T1213 for contributions you make yourself
If you contribute through your own bank or brokerage, your employer has no way of knowing. Form T1213, Request to Reduce Tax Deductions at Source, asks the CRA to authorize your employer to withhold less.
- Fill in the form with your expected deductible amounts for the year, such as regular RRSP contributions. Only include contributions you are confident you will make and that fit within your deduction limit.
- Attach proof. For RRSP contributions, that is typically confirmation of the automatic contribution plan from your financial institution, showing the amount and frequency.
- Submit it to the CRA, online through My Account or by mail.
- Receive a letter of authority. If approved, the CRA sends a letter saying how much less tax can be withheld. You give it to your employer’s payroll department, which adjusts your withholding for the rest of the year.
Processing takes several weeks, so file early in the year. Approval applies to one calendar year only; you file a new T1213 each year you want to continue.
T1213 is not just for RRSPs. It also covers other deductions that are not reflected in payroll, such as deductible support payments, child care expenses, employment expenses, carrying charges and rental losses.
Quebec residents who want their Quebec tax withheld at a lower rate make a separate request to Revenu Québec, using form TP-1016-V.
What can go wrong
- You stop contributing. If you get a reduction and then do not make the contributions, too little tax will have been withheld and you will owe the difference, possibly with instalment interest, when you file.
- A lump sum is not a good fit. The CRA generally approves reductions for regular contributions, not a one-off contribution you have not yet made. For a lump sum, the refund route is simpler.
- Your room is smaller than you think. A reduction based on contributions you cannot deduct leaves you owing tax at filing. Check your deduction limit on your latest Notice of Assessment first.
Is it worth the effort?
For someone contributing a few hundred dollars a month, a T1213 turns a refund of a few thousand dollars in April into a larger paycheque all year. It suits people who would otherwise carry credit card debt while waiting for a refund, or who would invest the difference right away. Some people prefer the forced saving of a refund; that is a choice, but the refund does not earn anything while the CRA holds it.
Show the math
Tax withheld at source is based on remuneration and TD1 claim codes; it ignores deductions made outside payroll. Under ITR 100(3), an employer may reduce withholding on remuneration transferred directly to an RRSP where it has reasonable grounds to believe the contribution is deductible. For other deductions, the CRA may issue a letter of authority under ITA s.153(1.1) after a T1213 request; the letter covers one calendar year. The reduced withholding approximately equals the annual tax saving from the deduction, spread over the remaining pay periods. The tax saving itself is unchanged; only its timing moves.
Key takeaways
- A refund is tax you overpaid; regular RRSP contributions let you stop overpaying.
- Payroll RRSP contributions usually reduce withholding automatically.
- Form T1213 gets your employer to withhold less for contributions you make yourself.
- Renew the T1213 every year and only claim contributions you will actually make.