# Dilemma: Schedule 7 and Jan/Feb transfer to RRSP of retiring allowance (T4 Box 66)



## allen11 (Apr 27, 2011)

The crux of this tax issue appears to impact anyone who receives a retiring allowance in the first 60 days of a calendar year and elects to have his or her employer do a *direct* transfer of the eligible portion of that retiring allowance to an RRSP at the same time. In a nutshell, the question is how and more importantly WHEN does one report (a) the RRSP contribution, (b) the income, and (c) the transfer.

I have spent the last couple of weeks trying to get a resolution of this problem which has caused me countless hours of frustration with the tax software I am using (more about the software later). I have scoured all applicable CRA tax guides and CRA web information (e.g. General Income Tax and Benefit Guide 2013, RRSP Guide 2012, Interpretation Bulletin IT-337R4 on Retiring Allowances, and of course the content of Schedule 7). 

None of these sources documents a scenario (for example) where I receive an RA in February 2013, the eligible portion say $10,000 is transferred directly to my individual RRSP in February 2013, and I receive soon after an RRSP contribution receipt that includes the $10,000 for the period Jan-Feb 2013. Then in Jan or Feb 2014, I receive from my x-employer a 2013 T4 slip with Box 66 showing the eligible retiring allowance of $10,000.

Last year when I was doing my 2012 return in April 2013 I called CRA who informed me that I need to report the RRSP contribution on my 2012 return (it will show up on Line 3 of Schedule 7, and any unused (aka undeducted) contribution will be carried forward to next year via amount (B) in the Deduction Limit Statement of the notice of assessment). CRA also said that on my 2013 return the following year, I would report Box 66 as other income to Line 130, and that I would also show the $10,000 as a transfer on Schedule 7 Line 14 (aka Line 240) where it would effectively increase my RRSP deduction Line 208 for year 2013 without impacting my contribution room. In other words, the RA and the transfer would be a wash. No tax payable on the $10,000, no impact to future RRSP room. So far so good.

This year for 2013 taxes, using Ufile for Windows, I work on my return and enter $10,000 in Box 66 of a T4 form in Interview mode and also enter immediately below that same amount of $10,000 which I transferred to an RRSP in 2013. The software then generated a Schedule 7 which I believe is WRONG but Ufile support claims is correct. Ufile included the $10,000 in S7 Line 2 which doesn’t make sense unless my contribution was in the last 10 months of 2013 (it wasn’t). So in effect, since my $10,000 was carried forward from last year to S7 Line 1 as unused contributions, and then also added in Line 2, Ufile was DOUBLE COUNTING the contribution. While at the same time, it correctly inserted the transfer amount in Line 14 (aka 240); and correctly added the $10K to Line 130 on the income side of the house.

The net effect is an erroneous excess over contribution “subject to penalties” and a screwed up Line 4 (aka Line 245).

Discussions in the Ufile community forum and with Ufile support resulted in complete pushback. They claim that they are interpreting the Income Tax Act correctly, and the their software is correct (!), despite the fact that I spoke with 4 people at CRA (Level 1, 2 and even level 3 staff) and I get consistent information that the correct approach, to summarize, is
(a)	Report RRSP contribution on 2012 return (S7 Line 3, since it was in first 60 days of the year)
(b)	Report retiring allowance on 2013 return (Line 130, since it is other income for 2013 and must come from a 2013 T4)
(c)	Claim transfer on 2013 Schedule 7 (Line 14, aka Line 240 since it was a direct transfer in 2013 to ultimately wash out the 2013 income via RRSP deduction Line 208)

Before I rant further, any comments from the experts? My preference is to be able to get a permanent fix from the vendor (if my understanding from CRA is correct), alternatively if the vendor won’t fix it, then a clean workaround.

I have been using Ufile for years and don't want to jump ship just yet. This has to be affecting more tax payers and I would prefer a resolution so that the next baby boomer retiring doesn't have to go through the same hassle. BTW, there are some CRA documentation improvements in order as well so taxpayers in this situation don't have to guess what to do in this use case.

Thanks.
p.s. - FYI, Studio Tax allows me to do (a) (b) and (c) above and CORRECTLY produces Schedule 7.


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## allen11 (Apr 27, 2011)

Sorry for the very long post. Anybody in the same position? Any advice?

To be briefer, here is the question. How you do handle a situation of receiving a retiring allowance in the first 60 days of 2013, employer direct transferring the eligible portion of that retiring allowance to an RRSP in the first 60 days of the same year, and then receiving (in Feb 2014) a 2013 T4 with Box 66?

How do you complete Schedule 7 for the 2013 and 2012 tax years? And if you have been in this situation, what tax software (if any) did you use?

Comments please.


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## fraser (May 15, 2010)

I do not have access to my records at the moment. I received a retiring allowance.

Only a portion of it was eligible to be moved over to an RSP. I had to tell my employer how much to place into the RSP and how much to give me as taxable income.

It seems to me that when reporting for that tax year I had to fill complete a form that determined how much room I would be entitled to. It was based on whether I had been a member of a DB pension plan. In my case, I had for the past 24 years. The bottom line for me was a about $21,000 in extra RSP room. I am fairly certain that my accountant had to file this form/schedule with my T4.


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## Eclectic12 (Oct 20, 2010)

... no personal experience but I did find these links:

http://www.cra-arc.gc.ca/tx/bsnss/tpcs/pyrll/rtrns/t4/spcl/rtrng-eng.html
http://www.cra-arc.gc.ca/tx/bsnss/tpcs/pyrll/rtrns/t4/spcl/trnsfr-eng.html
http://www.advisor.ca/tax/tax-news/protecting-retiring-allowance-payments-40963
http://www.cra-arc.gc.ca/E/pub/tp/it337r4-consolid/README.html


Cheers


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## Ponderling (Mar 1, 2013)

Not directly related to retiring allowances, but more as to early contribution to an RRSP. 

I have in past years when I had extra cash around ( yes, pre kids days) I would make the the bulk of my RRSP contribution for say 2013 on 1 Jan 2013. 

You did not have to deduct that contribution on the 2012 tax return. I would report the RRSP contribtions I made in calendar ie pre december 2012 as my 2012 contributions. 

For 2013 the most of the contribuiton would be invested working for me (positivley as one always hopes) from first week of January. I would get the 2012 income tax return back in May or so in 2013, see what my actual contribution room was for 2013, and top the last few hundred into the RRSP account at that time.


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