Refiling taxes -- RRSP ERROR
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Thread: Refiling taxes -- RRSP ERROR

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\r\n Refiling taxes -' + '- RRSP ERROR\r\n

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\r\n Hi Everyone,
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\nI was speaking with a colleague and from a house sale she did a MONSTER RRSP contribution of around 70K in 2015. On her 2015 taxes she claimed the ENTIRE 70K RRSP deduction even though her income was only 70K. This is obviously very stupid b/c she effectively claimed RRSP deduction on a portion of her income that she didn\'t even pay taxes on. OUCH.
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\nShe can simply refile her 2015 taxes and fix things up right? That\'s not an issue is it?
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\nThanks\r\n
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    \r\n Depends on what you mean by "refile her 2015 taxes".
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    \nCRA explicitly says:
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    \r\n \r\n Do not file another return for that year.\r\n \r\n
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    http://www.cra-arc.gc.ca/changereturn/
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    \nIf she has access through My Account, she can use that to identify the parts she wants to change (I am assuming she has her 2015 NOA already).
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    \nIf not, she can mail in a filled out T1-ADJ form that outlines the changes she wants to make.
    \nhttp://www.cra-arc.gc.ca/E/pbg/tf/t1-adj/README.html
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    \nCheers\r\n
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  • \r\n'; pd[1556802] = '\r\n
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    \r\n Thanks - it\'s such a major screw up I\'ve just told her to get an accountant to do it for her. I told her exactly what to do last year (and what she did certainly wasn\'t it). i think the peace of mind (for me too) of her getting an accountant is likely the best idea. Thanks.\r\n
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  • \r\n'; pd[1556906] = '\r\n
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    \r\n Quote Originally Posted by none\r\n View Post\r\n
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    Thanks - it\'s such a major screw up I\'ve just told her to get an accountant to do it for her. I told her exactly what to do last year (and what she did certainly wasn\'t it). i think the peace of mind (for me too) of her getting an accountant is likely the best idea. Thanks.
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    Maybe that is best, but it is just a matter of using the T1-ADJ for 2015 to provide CRA with a new number on Lines 14 and 16 on Schedule 7 http://www.cra-arc.gc.ca/E/pbg/tf/50...000-s7-16e.pdf and thus line 208 in the main tax return. Note that since she will be taking a smaller deduction, she will actually have more tax owing and CRA will send a Notice of Re-assessment with the amount owing AND interest due since April 30, 2015. After all, she has had some of the government\'s money as of that date for which she will owe interest. Note: I am assuming she can actually reverse out this data for a tax year that has long gone.
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    \nNote it will mess up her Schedule 7 in her 2016 tax return since the Carry Forward numbers wil be different too. On second thoughts, best an accountant lead her through it.\r\n
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  • \r\n'; pd[1558690] = '\r\n
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    \r\n Quote Originally Posted by AltaRed\r\n View Post\r\n
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    Maybe that is best, but it is just a matter of using the T1-ADJ for 2015 to provide CRA with a new number on Lines 14 and 16 on Schedule 7 http://www.cra-arc.gc.ca/E/pbg/tf/50...000-s7-16e.pdf and thus line 208 in the main tax return. Note that since she will be taking a smaller deduction, she will actually have more tax owing and CRA will send a Notice of Re-assessment with the amount owing AND interest due since April 30, 2015. After all, she has had some of the government\'s money as of that date for which she will owe interest. Note: I am assuming she can actually reverse out this data for a tax year that has long gone.
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    \r\nNote it will mess up her Schedule 7 in her 2016 tax return since the Carry Forward numbers wil be different too. On second thoughts, best an accountant lead her through it.
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    Is it really that simple? Will CRA accept this maneuver?
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    \r\nI made a large 30k RRSP deduction in 2015. Then in 2016 my income was about 25k higher than I expected it to be, I was 2 brackets higher, and only had 10k RRSP to contribute/deduct in 2016. I\'d like to retract my 2015 deduction by about 15k and increase my 2016 deduction the same. Two adjustments.
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    \r\nThis seems like a blatant, in your face request that CRA is bound to reject... Though in none\'s damsel\'s case it is more believable that this was an "error".\r\n
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  • \r\n'; pd[1558714] = '\r\n
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    \r\n I don\'t think CRA would accept your \'attempt\' for the reasons you cite.... gaming your marginal tax rate in hindsight. There would (could) be a lot of people messing with adjustments then to keep CRA busy. The only thing I know that can be reversed for sure is one\'s Pension Adjustment, i.e. the PAR post exiting from a DB pension program.
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    \r\nWe don\'t know the specifics of the \'damsel\'s\' tax situation in 2015 so we don\'t know if she took her income way below the top of the first tax bracket, or below her personal deductions or.....? Obviously if she went below what would have been taxable income of \'zero\', this would be a clear case of \'not so bright\'. None would have to provide more specifics. No one may know until it\'s tried. I certainly didn\'t turn up anything on Google.\r\n
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  • \r\n'; pd[1561257] = '\r\n
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    \r\n Quote Originally Posted by peterk\r\n View Post\r\n
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    Is it really that simple? Will CRA accept this maneuver?
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    What maneuver?
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    \r\nHow is it different than changing a return for say, under-reporting a charitable donation or forgetting to deduct an RRSP contribution?
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    \r\n Quote Originally Posted by peterk\r\n View Post\r\n
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    ... This seems like a blatant, in your face request that CRA is bound to reject... Though in none\'s damsel\'s case it is more believable that this was an "error".
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    Unless there is a history of doing the same thing - I don\'t see why there would be problem.
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    \r\nCheers\r\n
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  • \r\n'; pd[1556914] = '\r\n
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    \r\n It depends on what she meant by "claimed".
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    \nIf she didn\'t have enough RRSP room, CRA would probably already have been in touch with her about penalties for over contributions.
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    \nAssuming she had sufficient accumulated RRSP room, she was obligated to "report" the $70K contribution.
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    \nShe should not have deducted more than necessary to reduce her income tax to zero. The remaining contribution would be carried forward for use in future years.
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    \nIt is possible that CRA detected the error if she deducted the whole amount unnecessarily, and carried part of it forward automatically. She, and possibly her accountant, would have to study her NOA\'s to figure this out.\r\n
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  • \r\n'; pd[1557209] = '\r\n
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    \r\n Quote Originally Posted by OhGreatGuru\r\n View Post\r\n
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    She should not have deducted more than necessary to reduce her income tax to zero.
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    I would argue she should not deduct any contribution that brings her under $45k, if her regular income is 70k, so use around 25k a year in deduction.
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    \nShe could spread it out over 2-3 years to bring her income around 45k+ each year, instead of 70k... which will save her way more taxes.
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    \n(depending on the time value of money and what she will do with the tax refund).\r\n
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    \r\n \r\n Last edited by cashinstinct; 2017-04-20 at 11:35 PM.\r\n \r\n \r\n
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    1. #1
      Senior Member none's Avatar
      Join Date
      Jan 2013
      Location
      Victoria
      Posts
      2,995

      Refiling taxes -- RRSP ERROR

      Hi Everyone,

      I was speaking with a colleague and from a house sale she did a MONSTER RRSP contribution of around 70K in 2015. On her 2015 taxes she claimed the ENTIRE 70K RRSP deduction even though her income was only 70K. This is obviously very stupid b/c she effectively claimed RRSP deduction on a portion of her income that she didn't even pay taxes on. OUCH.

      She can simply refile her 2015 taxes and fix things up right? That's not an issue is it?

      Thanks

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