# RRSP - for 2010 or 2011?



## Jus1210 (Apr 27, 2011)

Hi, I have purchased my very first RRSP this February. My original plan was to use this for tax deduction for 2010, and that's what I told the banker as well.

However, I later found out that my maximum contribution for 2010 is actually 0. (I should have figured this out before I made the purchase... that's very stupid of me...)

I asked the banker about this situation, and she said it's alright even though I was buying it for 2010. What I have to do is to give the RRSP tax receipt to the accountant, and asked her to do the deduction for 2011 instead of 2010.

But the accountant (she's a family friend that does our taxes for us) said that when I bought the RRSP, the bank will also have some sort of a receipt of their own, and they will send this receipt to CRA. If on the receipt it says "for 2010", but I claim it on 2011, it may cause some problems. And she suggests me to ask the bank to change the purchase date for me.

I've been talking to both the banker and the accountant back and forth for a couple times, but there is no agreement. (Or maybe I'm not understanding them very well.) Does anyone know what should I do?

Um... I'm fairly new to this forum, and also new to RRSP, so I'm hoping I'm making sense here. I'll really appreciate any help or suggestions, it's been bothering me for days. Thanks a lot.


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## Potato (Apr 3, 2009)

Welcome to the forum!



Jus1210 said:


> Hi, I have purchased my very first RRSP this February.


A quick note here: an RRSP is an account that holds stuff (GICs, bonds, cash, stocks, funds of the aforementioned), so you contribute to one, not purchase it.



> My original plan was to use this for tax deduction for 2010, and that's what I told the banker as well.
> 
> However, I later found out that my maximum contribution for 2010 is actually 0. (I should have figured this out before I made the purchase... that's very stupid of me...)
> 
> ...


You're going to get nowhere trying to get a bank to change an RRSP receipt, so forget that route.

If you made the contribution in Feb 2011, you have the option of claiming it as a 2010 or 2011 contribution, and AFAIK, that info is not inherent to the contribution (not on the bank's receipt), you decide that on your taxes. Your accountant should know about the part to "defer the RRSP deduction". 

Did you have any taxable income in 2010? 

Now, how much did you contribute? The other important point to note is that you have a one-time $2000 over-contribution allowance for mistakes like this. If you contributed less than $2k, you'll be fine.

http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/rrsp-reer/cntrbtng/xcss-eng.html


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## Four Pillars (Apr 5, 2009)

Your accountant is incorrect - you can claim that contribution anytime you like.


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## stardancer (Apr 26, 2009)

Any RSP contribution must be reported in the year it was made. If you made the contribution between 1 March 2010 and 1 March 2011, it is reported on your 2010 tax return. If you don't report it on your 2010 return, then you must do a T1Adj for 2010 later on when you do want to report it.

However, on schedule 7, you can elect not to deduct any of the contribution from your 2010 income and carry the unused amount forward for use later on. So there is a difference between the reporting and the actual deduction.

If the contribution is over $2000 of your deduction limit as shown on your notice of assessment, you may be penalized for each month it is in your RSP and you will have to withdraw it.

As for changing the purchase date, I am really surprised that an 'accountant' would suggest that. Changing the date would be illegal; can't see any bank going along with this request.


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## the-royal-mail (Dec 11, 2009)

Why is your limit 0? I have never heard of this. Do you have any unused contribution room left over from previous years? For many people, this number is quite a bit of money. I have never heard of anyone who had 0 room available to them. How old are you?


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## jamesbe (May 8, 2010)

^ I assumed since it was the posters first RRSP contribution they had just begun employment. Could be an incorrect assumption.

On a selfish note, this year I plan on completely eliminating my backlog and be caught up! Of course I'll still have room for the following year.


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## Jus1210 (Apr 27, 2011)

Thanks for everyone's fast replies! 

I just started working in 2010, my income for 2009 is 0, so the deduction limit for 2010 is 0. This is my first time doing RRSP, thus all these newbie questions.

Unfortunately I already contributed more than $2000, so that over-contribution allowance didn't work.

This is what I concluded from everyone's post, and also some more questions.

1. NO such thing as changing the purchase date. 

2. From what Potato said, since my contribution date is Feb 2010, I can choose to claim it as either 2010 or 2011 contribution. But from what stardancer said, I have to report in on 2010 tax return (or do a do a T1Adj for reporting later), but on schedule 7, I can choose to not to do the deduction and carry the amount forward.

Are these two the same thing? So I can still include the contribution in 2010 tax return, but claim the deduction in either 2010 or 2011 (or even later)?

3.


stardancer said:


> If the contribution is over $2000 of your deduction limit as shown on your notice of assessment, you may be penalized for each month it is in your RSP and you will have to withdraw it.


Sorry, does this mean even if i didn't claim the deduction, as long as the money in my RRSP account exceeds the limit ($2000 in my case), I'd be penalized for it?

So I should withdraw it to avoid the penalty?

4.


Potato said:


> A quick note here: an RRSP is an account that holds stuff (GICs, bonds, cash, stocks, funds of the aforementioned), so you contribute to one, not purchase it.


Got it!! Thanks for the note!


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## cardhu (May 26, 2009)

Jus1210 said:


> Unfortunately I already contributed more than $2000, so that over-contribution allowance didn't work.


Or maybe it did ... you made the contribution in 2011, not 2010, so the determination of whether you’re overcontributed is measured against your *2011* contribution limit. If you’re still working on your 2010 taxes, then you won’t yet have received the notice of assessment that stardancer was referring to. But you can estimate your 2011 contribution room by taking 18% of your 2010 earned income. For example, if you earned $40,000 in 2010, your 2011 contribution limit would be $7,200. So with the $2000 over-contribution allowance, you could contribute up to $9,200 during calendar year 2011 without facing any penalties. 

Note that as a general rule, over-contributions are not a good idea.



> _claim the deduction in either 2010 or 2011 (or even later)_


“or even later” is correct. You can choose to defer the deduction for as long as you want, although there are limits to how long it makes sense to do so. 



> _does this mean even if i didn't claim the deduction, as long as the money in my RRSP account exceeds the limit ($2000 in my case), I'd be penalized for it? ... So I should withdraw it to avoid the penalty?_


Don't go making any hasty withdrawals ... Firstly, you might not be over-contributed at all, as shown above ... Secondly, even if you are, you CAN’T claim a deduction for an over-contribution, so clearly the fact that you haven’t deducted it doesn’t help you any, with the assessment of penalties ... Thirdly, there is a provision for withdrawing undeducted contributions if you should need to do so, but you can’t just make an ordinary withdrawal. If you do that, it’ll be included in your income for the year, and you’ll end up paying tax twice on that amount ... If you want to mitigate the penalties, and avoid the double taxation, you must follow a certain procedure. I don’t have the specific document number at my fingertips but you should be able to find it on the CRA website, if no one else pops in with the reference.


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## Potato (Apr 3, 2009)

Jus1210 said:


> 2. From what Potato said, since my contribution date is Feb 2010, I can choose to claim it as either 2010 or 2011 contribution. But from what stardancer said, I have to report in on 2010 tax return (or do a do a T1Adj for reporting later), but on schedule 7, I can choose to not to do the deduction and carry the amount forward.
> 
> Are these two the same thing? So I can still include the contribution in 2010 tax return, but claim the deduction in either 2010 or 2011 (or even later)?


Yes, you have to put in the contribution in your 2010 taxes (i.e.: the taxes you're preparing now) in the box for contributions made in the first 60 days of the year. Then there's another page (sched 7) where you elect to defer taking the deduction until later (then you claim it for 2011).

If you look at the form for over-contribution penalties, it's only for contributions up to Jan 1: if you make a contribution in the first 60 days of the year, and elect to defer taking the deduction until 2011, then if you get more deduction room from your 2010 taxes, you'll be ok (you'll get to use the new RRSP contribution room you generate in 2010 to apply against the contribution in the first 60 days, and then claim the deduction on your 2011 taxes).

http://www.cra-arc.gc.ca/E/pub/tg/t4040/t4040-e.html#P2144_51601



> Sorry, does this mean even if i didn't claim the deduction, as long as the money in my RRSP account exceeds the limit ($2000 in my case), I'd be penalized for it?
> 
> So I should withdraw it to avoid the penalty?


If you didn't make enough in 2010 to generate the room for it (plus the $2k in grace room), then you should withdraw to avoid the penalty. But it sounds like you did make enough in 2010 to generate the contribution room, so just defer the deduction and you'll be fine for next year.

And next year wait for your notice of assessment so you know how much room you have


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## Jus1210 (Apr 27, 2011)

I think I know what to do now. I'll include the contribution in 2010 tax, but defer the deduction until 2011 by filling out the Schedule 7 form. And this way it's not supposed to have any penalties.

Wow, this concept takes me several days to figure out and understand...

Again, thanks so much for all the replies and suggestions, they helped a lot!!


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