# Tax assessment



## londoncalling (Sep 17, 2011)

I recently posted this on the retirement thread. I realized this may be a better place for this post and have made some edits.

I recently received a reassessment for 2010. The problem with the reassessment is that my accountant, former accountant, claimed a pension rollover into a LIRA, as income and RRSP. As a result I had an over contribution to my RRSP and was taxed accordingly. I had the accountant file an adjustment to correct this. After failing to submit the adjustment I emailed her again with a CC to the CRA. My accountant resubmitted the adjustment and sent me the adjustment information. After the CRA had a look at it they tried to contact my accountant to clarify some details. My accountant failed to return phone calls emails etc. The CRA contacted me and I answered the questions that were asked regarding the rollover and that my options were to rollover to a LIRA or lock in my pension with the company that I had worked for. As a result it would be a tax sheltered rollover etc.

My reassessment is now completed and it is higher than it was originally. Since they couldn't get information from my accountant and I am not sure if my accountant attempted to fix the problem with the adjustment they may have not even considered that it was a sheltered rollover. Can I challenge the assessment? Can I pay the tax and do a correction next time I file?

I will be contacting the CRA regarding the reassessment next week. It is my understanding that I will be double taxed on this money. Once for the over contribution and again later when I withdraw the LIRA. The rollover was a transfer of tax sheltered income to a tax sheltered instrument (LIRA) so it should not be considered income nor an RRSP contribution as this amount was already taken from existing contribution room when it was originally pensionable if I understand correctly. The only rational I can think is that since it was a commuted value based on a DB pension that the full amount was considered the employer contribution. Does it matter that the company that administers the pension is from another province? My bank has confirmed that the rollover was a tax sheltered transfer.

I will be setting up an appointment with a different accountant to get a second opinion. Any other options that I should explore? I was just hoping someone can enlighten me and help me prepare going forward. Can anyone offer any insight or knowledge to my scenario or where I can find information on this?

Thanks in advance


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## MoneyGal (Apr 24, 2009)

I saw this in the other thread and didn't respond then. 

We don't have enough information to be able to assess your situation and what happened. 

I'm not clear whether the person you were dealing with is a CA or a tax preparer. I don't know what your relationship was with him or her - did you have an agreement that this person would act as your representative throughout the year (i.e. respond to inquiries on your behalf)? If yes, what was that agreement? 

I'm not clear whether that person filed an adjustment or failed to file an adjustment - you say both things. (It doesn't matter in your account - it's just a point where your post is not clear.)

There can be several reasons why you would end up in the situation you are. 

The penalty on the RRSP overcontribution is not taxation; it is a penalty. You may be able to recover this amount if there were a series of errors which lead to an overcontribution BUT I am somewhat at a loss here - if events took place as you described you would have had to authorize many different steps (contribution to the RRSP instead of to a LIRA, signing your tax return, signing the T1ADJ request, etc.). The accountant / tax preparer would not have been able to take these actions without your authorization and signature. 

I think you are suggesting from your post that your (former) accountant made a series of errors which lead to you overcontributing to an RRSP when you intended to roll funds over to a LIRA instead. My suggestion is that you find someone who will work with you over time to make sure you know what you are signing before you sign and submit things to CRA. 

At the same time, it is also possible that it was not workable (for various reasons) to roll all the funds over to a LIRA, and/or that the instruction you provided to the tax preparer was not to roll funds over to a LIRA. 

There isn't really a lot of "why" or details that your tax preparer would have provided to CRA. This is just a question of facts and what was authorized. You should be able to sort this out yourself with the help of a qualified tax professional whom you trust.


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## londoncalling (Sep 17, 2011)

Thanks for the response MG. My apologies for the lack of clarity I will try to explain things a bit better. The person that completed the taxes for 2010 was a CA. She had done my taxes for several years without a problem. I think that she had become really busy this tax season and had some office staff complete my return(Saskatchewan is booming) as I noticed extra staff in comparison to other years. Also most of my extended family, spouse, mother, in laws, cousins etc) had gone to her for the past year or two and many small mistakes were made on their returns (ie address, DOB etc)this tax season.

I did sign an authorization form for her to complete and send in my taxes this year just like years prior. I had never had any issues in the past and she was great at answering my questions and phone calls. After my taxes were submitted I went to pick up returns. (mine,spouse's, mother's) This is when I noticed small clerical errors. Wife's brithday, mother's address. When I got home I went over the numbers and noticed that the CA(or her staff) had declared an amount for a DB pension that I was no longer vested in that was rolled over into a LIRA. She then claimed an equal amount as an RRSP contribution. When I questioned the accountant on this she said did it that way as it was the easiest way and would have no effect as it would be taken off the income amount. I mentioned that I didn't have the RRSP room for starters and that it would eat up contribution room even if I had. More importantly it was a tax sheltered rollover that there was no need to do this. She apologized and said she would do an adjustment the following year as it would have no impact on my return.

Fast forward to the date of my assessment by the CRA. They pointed out an over contribution and as a result the full deduction could not be claimed. I had to pay tax on the difference at the appropriate bracket amount. This is when I went back to my accountant. The accountant was to file an adjustment on my behalf with the adjusted amounts. I was her office while she talked to the CRA about the error. I left with her assurance that it would be completed and I would receive a huge discount on my claim the following year. 

About 3 weeks later(can't remember exactly how long could be more) the CRA had contacted me about payment for my assessment. I notified them of the pending tax adjustment. They said they would wait a couple more weeks to see if it had been processed. When it wasn't received I had to again contact my accountant, (who failed to return calls and emails) As mentioned it was not until I cc'd the CRA on an email that she finally did contact me. It was at that point that she notified me and the CRA that the adjustment had been delivered to our local tax office, dated and stamped to be sent to Winnipeg and I could pick up a copy of the return. 

Weeks later the CRA contacted me regarding my adjustment with questions as to why the rollover was originally declared as income and then deducted as rrsp contributions. They had told me that the CA was not responding to their calls and emails. I think this may have been done out of spite as I had threatened to file a complaint with the BBB by this point. I told the CRA I had no idea why it was filed this way and that the accountant would have the information but I did tell them that it was my understanding the money was a DB pension that I was no longer vested in that was rolled into a LIRA that year. My options from the pension administer was either to lock it in with them, take a cash payout(and pay tax on it) or to transfer to a LIRA. I chose the LIRA for tax reasons. If they needed more information/documentation to contact me and I would try and track it down.

I have talked to my financial institution about the transfer and they tell me it was to be a tax sheltered event and they had completed this process numerous times without a problem. I hope this helps to clarify the scenario and I am guessing most people are going to say to contact the CRA which I will do next week after contacting my bank and the original holder of the pension or financial institution to get more information. It may be as simple as the pension administrator/bank did not complete the proper paperwork.

Since I am a neophyte on taxes I thought maybe I am being clueless as there may be some tax laws that will disallow a full rollover etc as you mentioned in your reply. Does anyone have any experience in regards to taxation with a LIRA rollover? I assume it is different in each province to to provincial tax laws. 

Once again thanks to this forum for their time and attention

Please let me know if there is any information that isn't clear and I will do my best to explain.


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## Young&Ambitious (Aug 11, 2010)

Hi London, 

Do you have your own set of records for these events? If so provide copies of these (until they ask specifically for originals, I would recommend holding onto these) to support your income and rollovers etc. The documentation would support the adjusted amounts and help to clarify things with CRA to reduce the confusion and potential for over/under reporting and errors. 

Mind you, your previous accountant should have done this as part of the adjustment so check your supporting documents (not your tax return) to ensure what you think happened is what happened.

Goodluck!


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## londoncalling (Sep 17, 2011)

I have started to locate most of my supporting documentation. I will have to get a hold of the original holder of the pension next week. Today I received a second letter that was supposed to arrive prior to the assessment. The letter clearly explains how they came to the reassessment and provided information on what supporting documents will needed if I plan to challenge the assessment. Hopefully things go well. When I talked to the rep from the CRA a couple months ago she seemed pleasant. From reading the reassessment letter it would seem that either the wrong documents where sent to me from the original pension holder. However, my accountant should have been able to explain this to me so I could have sorted this out prior to filing instead of trying to take a shortcut or file the claim as was knowing it would be reassessed. Thanks for the advice and sorry for not being clear in the original post. I was a little flustered as this has been hanging over my head for months and is still unresolved. More importantly, the amount of the assessment is somewhat substantial and the money would much be better used to do any of the following:

shore up emergency fund
pay down mortgage
max out RRSP, TFSA or RESP
heck I'd rather waste it on a poor stock choice than have to turn it over to the CRA now when I will have to pay tax on the amount later when I withdraw.

Cheers


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## MoneyGal (Apr 24, 2009)

Ugh. Just catching up on this now - it sounds like your accountant got overwhelmed and possibly got some less-than-competent help. Any proof you have (e-mails? your own notes about your conversations?) of your conversations with her might also be helpful. 

In your shoes, I would have the accountant pay any penalties you incurred. 

The reason I asked whether she is a CA is that as a member of a professional body, she is responsible to meet certain practice and conduct guidelines, and you can contact them to report her conduct in this matter: http://www.cica.ca/item19992.aspx


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## londoncalling (Sep 17, 2011)

Thanks MG. She was overwhelmed. I am not certain if I want to bother barking up that tree for compensation. Sometimes I would just rather let things go. I guess I'll have to wait and see how things go and how much fight I have in me. 

Just had a few questions about the supporting documentation for the rollover.

I completed a T2151 Direct transfer of a single amount under subsection 147(19) as well as an application for a locked in transfer to the holders of the pension. The pension fund then released the funds to my financial institution. 

They also sent a T4A to me for tax purposes. The amount of the check was different than the amount on the T4A. The scan of the check was for an amount greater than the T4A. My first question is how are these two documents related. Is the T4A required if it is a tax sheltered rollover (locked-in transfer). The CRA letter states "It is not clear based on the documentation on file what type of income the $xx,xxx represents and no corresponding RRSP contribution receipt has been issued for this amount.

Since the numbers on the T23151 and the T4A do not match the CRA has taxed the full amount of the T4A. I am not sure what the T4A is specifically for other than for Transfers of Funds between registered plans but would I need to claim it as income and pay the appropriate taxes? What would be the point of transferring the pension to a LIRA to pay taxes on it 2x?

I have to call the CRA on Monday as well as check with the original pension holder to see why the amounts are different and specifically what they were for.


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## MoneyGal (Apr 24, 2009)

I don't really have enough information to say but my first speculation is that some of the total compensation is non-vested pension amounts; with only the vested amounts going to a LIRA.


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## sprocket1200 (Aug 21, 2009)

always thoroughly check the accountants work. over the years I have found errors in my returns with every accountant I have dealt with. as with all business, they are in it for the profit too...


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## londoncalling (Sep 17, 2011)

MoneyGal said:


> I don't really have enough information to say but my first speculation is that some of the total compensation is non-vested pension amounts; with only the vested amounts going to a LIRA.


As far as I know the entire amount should have been vested as I worked for the company for a continuous period. After I changed employers I had a 2 year break in service losing my vesting. It was at this point I was no longer vested and had to decide what to do with the pension. I wish that I had 2 amounts because it would almost double the amount to transfer. I lost a lot by transferring, as the amount put in did not equal anything near the commuted value. Leaving it in would have even equated to less as it was based on a commuted value using actuary tables with a return of over 6%.

Once again much appreciated for the replies.


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## londoncalling (Sep 17, 2011)

sprocket1200 said:


> always thoroughly check the accountants work. over the years I have found errors in my returns with every accountant I have dealt with. as with all business, they are in it for the profit too...


sad but true


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## pgk1987 (Apr 8, 2012)

*Pension rolled into LIRA and RRSP*

Good day,
I have an issue. I retired from a Gov't job last year and took a "transfer value" for my pension. I was able to transfer most of it into a LIRA account but due to CRA limitations on amounts able to transfer to that LIRA I had the option of putting the rest into an RRSP, if I had room. So, I had Pension Services send a cheque to my RRSP account at ScotiaItrade. I received a T4a from the pension services which is fine, but never received a RRSP contribution receipt for the desposit. I called ScotiaItrade and they said it 'looks' like it was transferred 'in deed' so they will not issue the slip. Since I never filled out a T2151 I know this was supposed to be a deposit. What can I do to prevent paying taxes on this amount (it's $20,000) and actions can I take against Scotia Itrade for failing to produce the slip? I would really appreciate any assistance.

Sincerely,
pgk1987


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## caricole (Mar 12, 2012)

pgk1987 said:


> So, I had Pension Services send a cheque to my RRSP account at ScotiaItrade. I received a T4a from the pension services which is fine, but never received a RRSP contribution receipt for the desposit.


This seems to be the intentional misleading NON INFORMATION by the pension HOLDERS

The transfers should be initiated at THE RECEIVING INSTITUTION

Open a LIRA account, you will fill in the NEW account number for the transfert on the HOLDERS DOCUMENTS

Open a RRSP, The NEW financial institution will fill in the papers REQUESTING A DIRECT TRANSFER IN KIND as to art 146 ?..I think, and send it to the PENSION HOLDER

This direct transfer should not produce a T4 A ..it is not taxable and will not eat up any allowable pension contribution

It should be treated as any other direct transfer from one institution to another

If they realy send a cheque to the RRSP, Scotia Itrade shoul issue a RRSP contribution receipt

You would find trace of this contribution in your RRSP account, even if it was «IN KIND»....

my opinion


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## pgk1987 (Apr 8, 2012)

*Pension*

Caricole,
Very good point about the transfer being commenced at the receiving institution. When Scotia Itrade got the cheque they never sent me any copies of any documentation, the money just showed up in my account. I know for sure they messed up, and probably don't want to admit it. My BIG issue is that I have to clear this up in 3 weeks before the tax deadline! I wonder if I tell them I will make a complaint to the CRA for this receipt problem and maybe threaten to take my business elsewhere, would it make the situtation better or worse? I have been dealing with this for a month now and am still at a loss on how to get them to issue the receipt.


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