# stupid question about RRSP and refunds



## clovis8 (Dec 7, 2010)

My girlfriend was asking me this and I didnt know the answer although I assume it must be illegal. 

We can file our taxes anytime after the Jan 1 but we can contribute to our RRSP until March. When I fill out my taxes I am asked how much I put into my RRSP before Jan and how much after. 

If I know I am getting a refund what is stopping me from:

1) filing in Jan, 
2) claiming I am going to put more money in my RRSP in Feb,
3) taking the refund I get from my taxes (which has increased do my future RRSP contributions)
4) using the refund money to actually make those RRSP contributions.

I assume this must be illegal.


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## MoneyGal (Apr 24, 2009)

CRA won't process the refund until it has processed the RRSP contribution receipt which it either receives from the issuing institution and/or from you via your tax return.


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## clovis8 (Dec 7, 2010)

MoneyGal said:


> CRA won't process the refund until it has processed the RRSP contribution receipt which it either receives from the issuing institution and/or from you via your tax return.


 that makes sense. thanks.


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## I'm Howard (Oct 13, 2010)

No such thing as a Stupid Question.


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## clovis8 (Dec 7, 2010)

I'm Howard said:


> No such thing as a Stupid Question.


I say that to my students but we both know it's not always true.


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## warp (Sep 4, 2010)

I'm Howard said:


> No such thing as a Stupid Question.


That is definately true,,,but this question comes close.

How did you intend to use an RRSP contribution deduction if you havent ACTUALLY made the contribution?

Its like asking them for child tax benefits for a child you intend to have next year.

The CRA may be dumb as nails at times,,,but they sure aren't stupid.


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## sprocket1200 (Aug 21, 2009)

there are many ways to do this without all the hassle and with many benefits.

1. get a short term loan and do the same thing.
2. last year is gone, go to your investment advisor and start a PAC now so you can DCA into your investments all year and you won't have this problem next year. when you do this go to your employer and ask them for the tax for to reduce tax taken as you are buying RRSPs now.
3. most importantly, you NEVER want a refund on your taxes. you always want to pay. why let them use your money for free??


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## Plugging Along (Jan 3, 2011)

I'm Howard said:


> No such thing as a Stupid Question.


No, just stupid people... 

Not meant for the OP, just trying to be a little flipant and funny...


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## Eclectic12 (Oct 20, 2010)

sprocket1200 said:


> there are many ways to do this without all the hassle and with many benefits.
> 
> 1. get a short term loan and do the same thing.
> 2. last year is gone, go to your investment advisor and start a PAC now so you can DCA into your investments all year and you won't have this problem next year. when you do this go to your employer and ask them for the tax for to reduce tax taken as you are buying RRSPs now.
> 3. most importantly, you NEVER want a refund on your taxes. you always want to pay. why let them use your money for free??


The above will definitely ensure a contribution is made and can be deducted.
However, the original question was how to get CRA to pay the tax refund *before* making the RRSP contribution to generate a second refund.

A problem I can see is whether the forms/tax program would be available early enough and how long the first refund took to be received.

IMO, smarter moves would be the short term loan (avoids a return and then adjustment) or to figure out what is generating the refund so that with less tax taken at source, the RRSP contribution can be done during the tax year.


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## Eclectic12 (Oct 20, 2010)

MoneyGal said:


> CRA won't process the refund until it has processed the RRSP contribution receipt which it either receives from the issuing institution and/or from you via your tax return.


Hmmm ... if the first tax return filed does not claim an RRSP deduction, why would CRA wait to process the refund?

Though technically speaking, the process would be file a return, get a refund, contribute to the RRSP before the deadline and then file a request to adjust the already filed return.

I still don't think the plan will work as a lot of the tax forms/receipts are usually starting to arrive in mid-Feb. So I doubt one could get a return filed and refund processed before the RRSP deadline.

*** Update: I haven't found when the earliest a tax return can be filed, does anyone have a link or know?
However, CRA's website mentions that printed forms are available in Feb, so it would be tough
to turn this around in a month.


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

My my, what a complicated shellgame and discussion. Above all, what's the point? To use a future refund to fund a present-day contribution?

If one's money management is so poor that they need to dream up such things, I think they have bigger financial issues than this. In a case like this I would prescribe more time spent reading about saving money.


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## stardancer (Apr 26, 2009)

Eclectic12 said:


> *** Update: I haven't found when the earliest a tax return can be filed, does anyone have a link or know?


CRA just accepted electronic filing today, so processing started today (the 14th). Don't know about paper returns.


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## clovis8 (Dec 7, 2010)

Eclectic12 said:


> Hmmm ... if the first tax return filed does not claim an RRSP deduction, why would CRA wait to process the refund?
> 
> Though technically speaking, the process would be file a return, get a refund, contribute to the RRSP before the deadline and then file a request to adjust the already filed return.
> 
> ...



The theory would be easy. 

I filed my taxes today via netfile which was the first day you could use netfile. If you setup direct deposit a refund takes only about 8 days. 

So, in theory, I claim on my taxes I am contributing more to my RRSP than I had. I file on Feb 14th. I get a refund around the end of the month and then contribute to my RRSP.


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## clovis8 (Dec 7, 2010)

the-royal-mail said:


> My my, what a complicated shellgame and discussion. Above all, what's the point? To use a future refund to fund a present-day contribution?
> 
> If one's money management is so poor that they need to dream up such things, I think they have bigger financial issues than this. In a case like this I would prescribe more time spent reading about saving money.


Nobody is trying to actually do this it was just a theoretical question from my girlfriend that I couldn't answer.


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## Eclectic12 (Oct 20, 2010)

clovis8 said:


> The theory would be easy.
> 
> I filed my taxes today via netfile which was the first day you could use netfile. If you setup direct deposit a refund takes only about 8 days.
> 
> So, in theory, I claim on my taxes I am contributing more to my RRSP than I had. I file on Feb 14th. I get a refund around the end of the month and then contribute to my RRSP.


Ahhh ... then I believe MoneyGal would be correct then. CRA would likely wait for the RRSP contribution details either from you or the financial institution before sending the refund. It's a lot easier than chasing down anyone who made a mistake or is a crook. *grin* 

Somehow in re-reading the original post, I missed the "claim the RRSP deduction" on the return. I thought you were filing for an early refund without the RRSP claim - which is possible. Then contributing the refund before the RRSP deadline and finally sending in a change to the return.


However, as pointed out by others - there is far more benefit to contributing as early as possible and having the tax reduced at source to reflect (i.e. get the tax refund during 2010, while the RRSP is growing - rather than waiting until 2011).


Cheers


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## Eclectic12 (Oct 20, 2010)

stardancer said:


> CRA just accepted electronic filing today, so processing started today (the 14th). Don't know about paper returns.


I'm not sure of the dates for paper either. I didn't notice when the paper forms were in the post office and the CRA web site just says early Feb.

*giggle* - though even if the forms were dropped off at the local tax office, say the first week in Feb, I'd think one would have to be extremely lucky to get the refund back in time.

This is the same outfit that prints on the forms "you do not need to complete this area {direct deposit} every year". Yet somehow with the same bank account for 12+ years, they only seem to be able to direct deposit in the years I include a cancelled cheque.
*grin*

Lucky for me my cheques for that account are free.


Cheers


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## Jungle (Feb 17, 2010)

the-royal-mail said:


> My my, what a complicated shellgame and discussion. Above all, what's the point? To use a future refund to fund a present-day contribution?
> 
> If one's money management is so poor that they need to dream up such things, I think they have bigger financial issues than this. In a case like this I would prescribe more time spent reading about saving money.



The advantage would be that you could re-invest your refund without borrowing costs and waiting for the money to come after the rrsp deadline. 

See this year, (or ever year I should say), I figure out my tax refund before March 1. Then I reinvest the expected refund, back into my rrsp before the March 1 deadline. I have to borrow money to do this. (I borrowed money from our car repayment fund) What I get is a higher amount in the rrsp now, without waiting until after March 1 to contribute refund and then waiting next year to get the refund from that.


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

Very interesting jungle. So I guess that makes a little more sense, but could you not accomplish the same thing by setting up monthly RRSP contributions?


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## Eclectic12 (Oct 20, 2010)

clovis8 said:


> My girlfriend was asking me this and I didnt know the answer although I assume it must be illegal.
> 
> We can file our taxes anytime after the Jan 1 but we can contribute to our RRSP until March. When I fill out my taxes I am asked how much I put into my RRSP before Jan and how much after.
> 
> ...


Now that several options have been discussed, I'll get back to the original question of whether this is legal. I'm not a legal expert but IMO, yes this is illegal.

The bottom of the T1 General form, on page 4 is to sign off to certify that the information given is correct, complete and fully discloses income. It is also highlights that to make a false return is an offence.

This would be a false return as income is misrepresented as lower than it really is due to the *future* RRSP contribution.

I expect that NetFile provides a similar disclosure.


Cheers


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## Eclectic12 (Oct 20, 2010)

Jungle said:


> The advantage would be that you could re-invest your refund without borrowing costs and waiting for the money to come after the rrsp deadline.
> 
> See this year, (or ever year I should say), I figure out my tax refund before March 1. Then I reinvest the expected refund, back into my rrsp before the March 1 deadline. I have to borrow money to do this. (I borrowed money from our car repayment fund) What I get is a higher amount in the rrsp now, without waiting until after March 1 to contribute refund and then waiting next year to get the refund from that.


True ... though even if one could get the refund was paid without an RRSP receipt, I expect CRA would be have a dim view of inaccurately reporting one's income.

If the alternative of filing an accurate return, getting a refund then making the RRSP contribution and filing for an adjustment is done - timing will be critical but at least the return is accurate.

As for waiting until the following year for post Mar 1st RRSP deductions, there may be another option rather than waiting. If one has tax being withheld, say a regular pay cheque, a T1213 - Request to Reduce Tax at Source can be filed. The for includes a box for RRSP contributions. See CRA link below.
http://www.cra-arc.gc.ca/E/pbg/tf/t1213/

Cheers


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## Eclectic12 (Oct 20, 2010)

the-royal-mail said:


> Very interesting jungle. So I guess that makes a little more sense, but could you not accomplish the same thing by setting up monthly RRSP contributions?


Not really ... IMO, monthly RRSP contributions accomplishes more.

The first benefit is that the RRSP contributions have more time to grow tax free.

If one files a T1213 - Request to Reduce Tax at Source, the second benefit is that the tax deduction is paid in the same year as the RRSP contributions (i.e. you don't have to wait for the return to be filed/review/refund paid).


Cheers


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## Jungle (Feb 17, 2010)

Eclectic12 said:


> True ... though even if one could get the refund was paid without an RRSP receipt, I expect CRA would be have a dim view of inaccurately reporting one's income.


Absolutely. Because it's kinda being misleading. Better to borrow money from somewhere if you want to re-invest your refund, before March 1 deadline. Once the refund comes, just pay back the loan.


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## Jungle (Feb 17, 2010)

Eclectic12 said:


> As for waiting until the following year for post Mar 1st RRSP deductions, there may be another option rather than waiting. If one has tax being withheld, say a regular pay cheque, a T1213 - Request to Reduce Tax at Source can be filed. The for includes a box for RRSP contributions. See CRA link below.
> http://www.cra-arc.gc.ca/E/pbg/tf/t1213/
> 
> Cheers


True, better to keep your money rather than let the gov hold it for a year. The only thing that worries me is how accurate payroll is taking less tax off. Then, you have a bigger pay cheque. You need to be really careful and ensure you are accurately using that "extra money" towards your rrsp.

For me, it just seems easier to do the taxes once per year, figure out the refund and then you can accurately re-invest it.


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## Eclectic12 (Oct 20, 2010)

Jungle said:


> True, better to keep your money rather than let the gov hold it for a year. The only thing that worries me is how accurate payroll is taking less tax off. Then, you have a bigger pay cheque. You need to be really careful and ensure you are accurately using that "extra money" towards your rrsp.
> 
> For me, it just seems easier to do the taxes once per year, figure out the refund and then you can accurately re-invest it.


True ... which is why some stick to the "end of the year" RRSP contributions etc. 

Though you are still doing the taxes once a year. The only change is that the T1213 with explanation is being filed with enough lead time for the results to be passed on to payroll.


Then too, if payroll can't accurately reduce the tax after receiving the go-ahead from CRA - then I would think one is already at risk of having the wrong tax levels taken off.
*grin*

Or maybe I'm just lucky that our payroll department is extremely thorough and on the ball.


Cheers


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## Eclectic12 (Oct 20, 2010)

Jungle said:


> Absolutely. Because it's kinda being misleading. Better to borrow money from somewhere if you want to re-invest your refund, before March 1 deadline. Once the refund comes, just pay back the loan.


I'm sure we are in agreement but to be clear, there is nothing "kinda" about it. 

One knows one's income is $X but is deliberating reporting $Y, which is not accurate. To top off, the sign off confirms that everything is accurate. What the RRSP contribution will change in the future is irrelevant to what the situation is when the return is filed.


And yes ... if the choice is misrepresenting one's income or borrowing - borrowing wins hands down. The fewer potential issues during an audit increases ones chances of a reasonable negotiation if something is found to be wrong. 

It helps the stress level too!


Cheers


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