# RRSPs without a T4?



## Justin1980 (Feb 23, 2013)

Hey guys,
Unless I'm wrong, T4's don't HAVE to be issued until the last day in February.

This I believe, is also the last day to make RRSP contributions. 

How then, are we able to ACCURATELY contribute to our RRSP to optimize things if we don't have our T4's?

I realize we can add up our pay stubs, but you'd think we'd be given a couple weeks to make use of our T4's?

Sorry for such a basic question. This is my first year actually trying to get serious about understanding my finances!

Another quick question: is turbotax sufficient if holding US and CAD stocks, AND cash inside of TFSA and RRSP accounts?


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## Guban (Jul 5, 2011)

You can't accurately predict your tax refund before having all of the information. You'll just have to guess. Prepare your return with a best guess. If you contribute too much, and you don't want to deduct it because it'll drop you too far into a lower tax bracket, then don't deduct your full contribution and carry it forward to a future year.

Note that things are even worse for investors that get T3 slips. They don't have to be issued until end of March, I believe.

Not sure why you are asking about turbo tax with these accounts. TFSAs are tax free (don't play a role in your tax return), and it doesn't matter what you hold in your RRSPs for your income tax return - just the contribution and the deduction.


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## OhGreatGuru (May 24, 2009)

Justin1980 said:


> Hey guys,
> ...
> How then, are we able to ACCURATELY contribute to our RRSP to optimize things if we don't have our T4's?
> 
> ...


I don't understand the question. Your RRSP room for 2013 was determined by your 2012 and previous year tax returns. It was reported to you on your 2012 NOA. Your T4 for 2013 determines how much you can contribute next year (2014).


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## AltaRed (Jun 8, 2009)

OhGreatGuru said:


> I don't understand the question. Your RRSP room for 2013 was determined by your 2012 and previous year tax returns. It was reported to you on your 2012 NOA. Your T4 for 2013 determines how much you can contribute next year (2014).


I didn't understand the question either, but another point worth noting building on OGG's comment (that contribution room for 2013 has already been determined from prior years) is that IF you are wondering just how much to contribute and deduct for 2013, that is a two part process. The contribution limit as OGG says has already been pre-determined for 2013, but the decision on the actual amount you wish to take as a deduction on your 2013 tax return can wait until you prepare your tax return and do some 'what if' analysis to optimize the amount of deduction (to not take too much and drop yourself into the lowest tax bracket, or worse, no tax).


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## Justin1980 (Feb 23, 2013)

yes but (keep in mind im just learning and might be completely wrong here...)
Let's say 2012 determined i have $20,000 in available RRSP room.
I am unsure of my precise 2013 earnings, i believe it's between $31,000 - $32,000.
Since:_
13.3%on the first $30,000 of taxable income
15.2% on the first $40,000 of taxable income_
So unless i know exactly how much i made, i won't know exactly how much to contribute to get everything in the under $30K bracket. Obviously i can just contribute $2,001, but that's not really the point of the question.


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## OhGreatGuru (May 24, 2009)

Justin1980 said:


> ..._
> 13.3%on the first $30,000 of taxable income
> 15.2% on the first $40,000 of taxable income_
> .../QUOTE]
> ...


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## Justin1980 (Feb 23, 2013)

yeah that's not at all what im asking. Maybe i have no idea what im talking about. I thought that, if i made $32,000 gross from jan 1, 2013 - dec 31, 2013. Then on jan 15, 2014 (or any time before march 1, 2014) i contribute $2000 to my RRSP, that it would have the effect of reducing my apparent income (as far as which tax bracket im in). Thereby avoiding 15.2% on that $2000.
Nevermind though, this is my first year doing my taxes and I can only assume i must sound like an idiot.
My apologies.


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## MoneyGal (Apr 24, 2009)

Jman: your questions make *some* sense. 

He's trying to optimize the tax efficiency of the contributions. 

This isn't a matter of knowing the contribution amount alone, but his total taxable income for the year against which the contribution will be taken. 

AltaRed's comments acknowledge this perfectly. 

BTW the last day for contributions for the 2013 tax year is EOD March 3, 2014.


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## nobleea (Oct 11, 2013)

Just take a best guess and contribute on that amount. If you contributed too much (worst case scenario 1K too much), just claim 1K less on your RRSP contribution come tax time. If you didn't contribute enough, it's really not a huge amount. If you thought you were going to earn 31,500, but you earned 32,000, that 500 extra you paid taxes on at the higher marginal rate is going to cost you $9 in additional taxes ($500 x (15.2%-13.3%)).


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## lightcycle (Mar 24, 2012)

I'm not sure where you got your 13.2% and 15.3% figures from, as the federal+provincial taxes differ province-to-province and you don't say where you're from. Check this site out for how to calculate your taxes:

http://www.cra-arc.gc.ca/tx/ndvdls/fq/txrts-eng.html

Play around with this calculator to see an estimate on what you owe. If you plug in different numbers, you might get a sense as to how the sliding tax rate works. 2013 calculator is half-way down the page.

http://ultimatecalculators.com/canada_tax_calculator.html

These are just rough figures. There may be tax credits and write-offs that affect your real numbers that the calculator is not taking into account.

Hope this helps.


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## Eclectic12 (Oct 20, 2010)

Justin1980 said:


> Unless I'm wrong, T4's don't HAVE to be issued until the last day in February.


YMMV ... despite seeing several sources saying the T4 had to be done by the last day in Feb, several employers I've worked for didn't deliver them until mid march. My current employer has them done by mid-Feb.




Justin1980 said:


> How then, are we able to ACCURATELY contribute to our RRSP to optimize things if we don't have our T4's?
> I realize we can add up our pay stubs, but you'd think we'd be given a couple weeks to make use of our T4's?


I usually haven't worried about it too much as I've usually had enough room to get contribute so that I'm below whatever number it works out to. If there's any extra, I carry the extra RRSP deduction forward and claim it the following tax year (or report as foreign taxes paid).

Secondly - are you sure you need to add up your pay stubs? 
For years now, mine have a running total so that if I look at December's pay stub (the later the better), I have a pretty good year to date total for income, taxes withheld, pension contributions, through work charitable donations etc.

Unless I've had some reason to question the totals - it's been pretty good.




Justin1980 said:


> Another quick question: is turbotax sufficient if holding US and CAD stocks, AND cash inside of TFSA and RRSP accounts?


Does Turbotax provide investment reporting?

I thought it was for tax returns - in which case, there's nothing to report for a Canadian tax return as long as the investments are still sheltered in the TFSA and/or RRSP.

Note that if one holds a US dividend (or income) paying stock in the TFSA, the IRS is going to take the 15% withholding tax but there's nothing to report on a Canadian tax return as the TFSA is Canadian tax free.


Cheers


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## Eclectic12 (Oct 20, 2010)

Justin1980 said:


> .... So unless i know exactly how much i made, i won't know exactly how much to contribute to get everything in the under $30K bracket. Obviously i can just contribute $2,001, but that's not really the point of the question.


True ... but then again, there may be other factors that are also increasing your income that your employer doesn't know about. 
For example, investment income - particularly eligible dividends which increase your income more than the amounts received.

http://business.financialpost.com/2012/06/02/watch-out-for-gross-up-of-tax-dividends/


So even if you know the T4 income accurately - the overall income could vary quite a bit more.


Cheers


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## wendi1 (Oct 2, 2013)

It's pretty hard, for sure, if you are doing your taxes for the first time. I would use my last pay stub for a pretty good idea. You should be aware of dividends and interest accumulating in your non-registered investment account, and any charitable contributions, medical expenses, and the like. I often do a quick and dirty tax return before RSP season is over.

Don't forget that if you overcontribute, you can move your RSP contribution over to the next year. If you undercontribute, you are out of luck.

As far as I know, you have to look after the Adjusted Cost Base for your unregistered investments yourself - no consumer tax package that I know of will do it for you. Folks, I would be happy to be proven wrong here.


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## MoneyGal (Apr 24, 2009)

None that I know of.


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## Justin1980 (Feb 23, 2013)

Thanks everyone. I think i have a better idea now. I need to work on better wording my questions.


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## Guban (Jul 5, 2011)

Justin1980 said:


> Thanks everyone. I think i have a better idea now. I need to work on better wording my questions.


I (think) that I understood your RRSP question, and stand by what I posted. Of course, I did delete my originally typed message about earned income from previous years, that were very similar to some of the later posts.

Still don't know what you are looking for in a tax program, however.


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## Eclectic12 (Oct 20, 2010)

Justin1980 said:


> I think i have a better idea now.
> I need to work on better wording my questions.


You are welcome.

To hopefully make more clear my point about other sources of income by re-stating it - one can have have an accurate T4 income number but if T4 is only 95% of total income, one will still be off by 5%.


The other thing - if you believe your income will rise over the years - maybe it's it worth maxing out your TFSA first?
That way when you make your RRSP contributions at a higher income level, the tax refund will be larger. Something to think about ...


As for the turbotax question - as I believe it is focused on tax returns, it's features for investments (ex. stock) will likely matter if you have investments in a taxable account.

If you do have taxable investments - have you setup a bookkeeping system? 
Have you taken a look at the sticky in this section "How Investment Tax Work"?

I've found it a lot easier to learn a bit at a time instead of trying to sort out what to do in a compress time frame.


Cheers


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## Taraz (Nov 24, 2013)

Justin1980 said:


> yes but (keep in mind im just learning and might be completely wrong here...)
> Let's say 2012 determined i have $20,000 in available RRSP room.
> I am unsure of my precise 2013 earnings, i believe it's between $31,000 - $32,000.
> Since:_
> ...


I'm not sure if you understand the Canadian tax brackets. As you go up in tax bracket, the _marginal_ tax rate increases. For instance if you make an extra dollar over a tax bracket, the taxes on that one dollar are higher (15.2% in your example), but the taxes on the rest remain the same. For purposes of an RRSP, you should be able to guestimate your income closely enough based on adding up your payroll slips. 

The CRA tax brackets for 2013 are: 

15% on the first $43,561 of taxable income, +
22% on the next $43,562 of taxable income (on the portion of taxable income over $43,561 up to $87,123), +
26% on the next $47,931 of taxable income (on the portion of taxable income over $87,123 up to $135,054), +
29% of taxable income over $135,054.

http://www.cra-arc.gc.ca/tx/ndvdls/fq/txrts-eng.html


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## OptsyEagle (Nov 29, 2009)

If you have ever wondered why CRA allows any "over-contribution" at all, like the $2,000 amount we are currently allowed, you now have your answer. It is because they are very aware of the issue you describe in your OP and have implemented this to account for small mistakes in your calculations.


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## Justin1980 (Feb 23, 2013)

Eclectic12 said:


> You are welcome.
> 
> If you do have taxable investments - have you setup a bookkeeping system?
> Have you taken a look at the sticky in this section "How Investment Tax Work"?
> ...


Thank you, and i agree! I have done a lot of learning this year, and still have a ton to learn.


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