# Claiming RRSP this year or next?



## mappy818 (Jan 9, 2014)

Hi,

My company allows us to put our bonus pre-tax into RRSP, so for last year's bonus (paid out Jan 2013) I put $4600 into RRSP and carried the entire amount forward. This year, I have $11200 RRSP contribution room, and I currently have $4600 (pre-tax contribution) + $3150 (after-tax contribution). I also put this year's bonus (paid out this month) $5000 into RRSP. My dilemma right now is whether to max out this year's contribution room to get a nice fat refund from the gov't. The way I see it is that even if I don't contribute next year's bonus into RRSP, I'll just have to pay back the refund I got this year, essentially a interest free loan from the gov't? Do I have that right? Punching the numbers into StudioTax, if I just claim the $7750, I'll get about $300 back. If I claim the full $11200, I can get $1500 back. Is the worst case to pay $1200 in taxes next year if I don't contribute anything?

My gross income is hovering around the 80k to 85k mark these few years, I don't see it growing too much in the next 2-3 years either. 

Another question I have is if I contribute another $3000 into RRSP for this year, I won't be over contributing right? As long as I carry forward the 5k bonus money and not claim it this year, it won't be counted towards my 2013 contribution room?

I've been debating pros/cons on my RRSP situation with myself for the past few days, and would like a few other opinions. Thank you all!


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## wendi1 (Oct 2, 2013)

When you got your refund cheque last year, there was a place on the form (Notice of Assessment) that described your RRSP contribution room for this year. If you can't find it, call CRA and find out what it is. It is important not to overcontribute. If you have already made the contribution, it won't be counted twice (once when you make the contribution, and once when you take the deduction - that would hardly be fair, would it?)

For me, the important thing about taking RRSP deductions is to take them when you are making more more money than you expect to receive in your retirement. Since you are making 80-85K, and don't see big leaps down the road, I would take the deduction. Why didn't you take it last year, may I ask?

I might be tempted to run some numbers and see if I should submit a correction to my taxes for last year to take advantage of the RRSP deduction for last year, rather than having carried it forward. Maybe get a tax person to look at it before the 2013 rush starts.

I don't see the advantage in your case of carrying it forward this year.


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## mappy818 (Jan 9, 2014)

wendi1 said:


> When you got your refund cheque last year, there was a place on the form (Notice of Assessment) that described your RRSP contribution room for this year. If you can't find it, call CRA and find out what it is. It is important not to overcontribute. If you have already made the contribution, it won't be counted twice (once when you make the contribution, and once when you take the deduction - that would hardly be fair, would it?)


The contribution room on the NOA says $11200, which caused me to have a little worry that I may have over contributed if I claimed the $4600 (carry forward from last year), $3150 (regularly contributions), $5000 (this year's bonus) + another $1000 I hope to contribute by end of Feb.. But like you said, I did claim the $4600 last year, just carried it forward, so no worries about over contribution right?



wendi1 said:


> For me, the important thing about taking RRSP deductions is to take them when you are making more more money than you expect to receive in your retirement. Since you are making 80-85K, and don't see big leaps down the road, I would take the deduction. Why didn't you take it last year, may I ask?


I didn't take it last year because it was my first year putting pre-tax money into RRSP, and from various forums I read, it was safer carrying it forward to the next year in case I don't contribute equal or more this year and would then have to pay taxes. However, this year, when I'm thinking of this logic, that's when I thought it would be better to take the refund, and hope for the best next year. If I can't contribute as much, I'll just have to pay back what I got this year, interest free. 

Thanks wendi1!


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## Eclectic12 (Oct 20, 2010)

It is hard to tell as there seems to be confusion around "pre-tax"/"after-tax" contributions as well as unclear or not enough info.

As an example, you say you put your 2012 bonus into your RRSP "pre-tax" in Jan 2013 with the entire amount carried forward. As I understand "pre-tax", this means the $4.6K was not reported as income so that there is nothing to be carried forward or deducted in future tax years. The RRSP contribution room has been reduced automatically in this situation as not reporting it as income means your earned income is lowered which also means the new RRSP contribution room earned will be lower.

If there is a contribution that has not yet been deducted - then the contribution can't be "pre-tax". 

Otherwise the gov't would take a double reduction of tax revenue as when it was contributed, no taxes were taken at the same time yet the deduction would remove more taxes from the income it was deducted against.


So I'd recommend for step one to be making sure which contributions are pre-tax with no future deductions and which are post-tax with available deductions. It might change you situation dramatically as to what's available for deduction and possibly needing to make more contributions to be able to "max out the $11.2K".


As well, without being clear on this - it's hard to figure out how close to using up all your RRSP contribution room you are.

Cheers


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## mappy818 (Jan 9, 2014)

I'm probably doing a bad job of explaining it since I'm confused about the entire before/after tax contributions as well. That's also partly the reason why I'm asking the experts here! I'm not entirely sure how my company will report the $4.6k until I get my T4, which would be in a month or so. On my pay slips, I see two columns, gross income and gross taxable income. The $4.6k is reporting in gross income, but not in the gross taxable income. Things maybe clearer once I get my actual T4 and compare the numbers.

What I did for the 2012 tax year was I had a contribution room of $8.5k, and I contributed $3.9k after-tax + $4.6k pre-tax between March 2012 to Feb 2013. I then claimed the $3.9k and carried forward the $4.6k. Here's what it says on the CRA website:

Unused contributions available for 2012 $0.00
Plus: Current year contributions (including transfers)	+	$8,500.00
Total $8,500.00

Minus: Deducted contributions (including transfers)	−	$3,900.00
Unused RRSP contributions available for 2013 $4,600.00

2012 RRSP deduction limit	= $8,574.00
Minus: Allowable RRSP and SPP contributions deducted in 2012	− $3,900.00
Unused RRSP deduction limit at the end of 2012	= $4,674.00

Plus: 18% of 2012 earned income of $84,797.00 = $15,263.00
Minus: 2012 pension adjustment	− $8,696.00
Minus: 2013 prescribed amount for connected persons	− $0.00
Additional deduction limit based on 2012 *	= $6,567.00
Subtotal	= $11,241.00
Minus: 2013 net past service pension adjustment	− $0.00
Plus: 2013 pension adjustment reversal	+ $0.00
RRSP deduction limit for 2013	= $11,241.00


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## Eclectic12 (Oct 20, 2010)

mappy818 said:


> The contribution room on the NOA says $11200, which caused me to have a little worry that I may have over contributed if I claimed the $4600 (carry forward from last year), $3150 (regularly contributions), $5000 (this year's bonus) + another $1000 I hope to contribute by end of Feb..
> 
> But like you said, I did claim the $4600 last year, just carried it forward, so no worries about over contribution right?


If the $4.6K was reported but not deducted, then it (plus any other RRSP contributions that haven't been deducted) should be reported as part of the 2012 NOA as part of the "Your 2012 RRSP Deduction Limit Statement" under Part B "Unused RRSP Contributions". Part A is the available RRSP contribution room.

Since this is calculated as part of your 2012 tax return, it should have properly adjusted your available RRSP contribution limit as needed.

Where schedule 7 "RRSP Unused Contributions, Transfer and HPB or LLP Activities" was filled out correctly, reported but not yet deducted RRSP contributions should not affect your RRSP contribution limit as line 1 will identify it as having previously been recorded (and previously reducing your RRSP contribution limit as appropriate).




mappy818 said:


> I didn't take it last year because it was my first year putting pre-tax money into RRSP, and from various forums I read, it was safer carrying it forward to the next year in case I don't contribute equal or more this year and would then have to pay taxes. However, this year, when I'm thinking of this logic, that's when I thought it would be better to take the refund, and hope for the best next year. If I can't contribute as much, I'll just have to pay back what I got this year, interest free.


I don't understand this ... where I've put pre-tax money into a company sponsored Group RRSP, the income stays level as if I'd taken the overtime money as cash, income would have gone up. Since it went pre-tax in the Group RRSP through the company, no income was reported so that the overall income reflected the tax deferral. But this happens *every* year at source. As long as the overtime matched the Group RRSP contribution - there was nothing happening year to year, despite the overtime changing year to year.

Now if the overtime was after-tax, where both the yearly income level and the overtime were changing - then there was a potential for a mis-match.


There might be something I'm missing in the treatment of bonus money.

Cheers


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## wendi1 (Oct 2, 2013)

You know, mappy - you can call CRA. They will have all your numbers right in front of them, and will be able to tell you what your contribution room is right away. They can be very helpful. 

But it should all be there in your NOA.


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## lightcycle (Mar 24, 2012)

CRA also has a website you can look up your contribution limits, if you don't want to wait till Monday for their offices to open.

However you'll need a copy of your last tax filing to register for an ID/password.

http://www.cra-arc.gc.ca/esrvc-srvce/tx/ndvdls/myccnt/menu-eng.html


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## Eclectic12 (Oct 20, 2010)

mappy818 said:


> I'm probably doing a bad job of explaining it since I'm confused about the entire before/after tax contributions as well. That's also partly the reason why I'm asking the experts here!


 ... no worries ... my aim is to make sure you've confirmed what's happening so that the plan is based on that.




mappy818 said:


> I'm not entirely sure how my company will report the $4.6k until I get my T4, which would be in a month or so ...


I'll look through the numbers when I get a chance ... but in the meantime, is there a pay specialist you can ask at your company?


Cheers


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## Eclectic12 (Oct 20, 2010)

wendi1 said:


> You know, mappy - you can call CRA. They will have all your numbers right in front of them, and will be able to tell you what your contribution room is right away. They can be very helpful.
> 
> But it should all be there in your NOA.


 ... a good point but I'm not sure finding out the available RRSP room (and available deductions) is going to clear up enough to figure out what to do.


If the bonus is going into the RRSP without income tax being withheld and is not being reported as taxable income - then the PA should be taking care of it, where it won't provide a deduction from income (what I'm used to as "pre-tax").

If the bonus has income tax being withheld and is being reported as taxable income - then the bonus will be an RRSP contribution, with a deduction.


Until this is confirmed - it's going to be tough to be sure what any potential refund will be and what makes the most sense.


Cheers


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## Eclectic12 (Oct 20, 2010)

mappy818 said:


> I'm probably doing a bad job of explaining it since I'm confused about the entire before/after tax contributions as well ...
> I'm not entirely sure how my company will report the $4.6k until I get my T4, which would be in a month or so ...
> 
> 2012 RRSP deduction limit	= $8,574.00
> ...


Having contributed only $3.9K that was deducted in 2012 and CRA reporting the "unused" as going from $0 to the matching amount seems to say the bonus was reported as income.

I'm not sure why the columns wouldn't show it (hopefully the T4 clears it up).


Cheers


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## mappy818 (Jan 9, 2014)

Thanks for everyone's input so far, I think I have to wait for the 2013 T4 to see exactly how the income/pre-tax rrsp is being reporting before making any decisions.


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## Eclectic12 (Oct 20, 2010)

The other question is whether there's a limit to how big your bonus can be.

You'd mentioned that the articles were worried about a future year bonus exceeding your RRSP contribution room, resulting in taxes being payable. It looks like with earning something over $6K in RRSP contribution room from income (after the PA reduces it) and having about $5K of unused room - the bonus can be up to $11K before you might be using up enough of the buffer to be wanting to carry over the deduction.

If there's a limit to the bonus of say $7K - you'd have to manage keeping a bit of extra contribution room but unless something changes the year by year earning of RRSP contribution room - there so little difference between the two that I wouldn't bother carrying it over. Just something to think about and work out the details for your situation as without asking detailed questions, a good portion of the comments are fairly general.


Cheers


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## amitdi (May 31, 2012)

I am trying to find the answer for my case, but its not that clear so let me ask my question (similar to OP's case but simpler):
My limit in 2013 assessment was $18K and I contributed $12K last year (in Nov 2013).

Last week I contributed another $10K (my thought was I got new limit for 2014). But now I think should I have waited for CRA to officially tell me the new limit? OR I am good here?
(PS: My income for 2013 was ~80K, so my limit would be enough so as not to overcontribute in the grand scheme of things. Its just I am worried about contributing before the assessment).


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## Guban (Jul 5, 2011)

Likely no problems here.
Last year, you contributed $12k and your limit was $18k. That leaves $6k left. This year, you've used the remaining $6k with your $10k contribution, and you'll carry the remaining $4k forward to next tax year (2014). Because you've contributed in 2014 and you'll have the earned income to cover the contribution, this is not a problem with regards to an overcontribution.
I've assumed that you'll be earning RRSP room based on your 2014 ~$80k salary. If you have a very large pension adjustment that prevents you from earning at least $2k in room, then you'll face a 1%/month penalty on any amounts contributed over the $2k overcontribution limit.


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## Eclectic12 (Oct 20, 2010)

amitdi said:


> I am trying to find the answer for my case, but its not that clear so let me ask my question (similar to OP's case but simpler):
> My limit in 2013 assessment was $18K and I contributed $12K last year (in Nov 2013).
> 
> Last week I contributed another $10K (my thought was I got new limit for 2014). But now I think should I have waited for CRA to officially tell me the new limit? OR I am good here?
> (PS: My income for 2013 was ~80K, so my limit would be enough so as not to overcontribute in the grand scheme of things. Its just I am worried about contributing before the assessment).


Assuming the $18K was on your 2012 NOA, under Part A of "Your 2013 RRSP Deduction Limit" and with the $12K contribution in 2013, you started 2014 with $4K plus whatever RRSP room was earned in 2013. So likely, you will need at least $6K earned RRSP contribution room from 2013.

Without knowing if you have a pension - it is difficult to say if you have over-contributed or not.

The 2013 RRSP contribution room earned ( based on the most likely factors that would affect you) = [ the lesser of (18% x earned income) *or* $23,820 ] - pension adjustment (PA) + pension adjustment reversal (PAR)

Any idea of how much RRSP contribution was earned in 2012? 
If it was over $6K where there haven't been major changes - you should be good.

If your 2012 income was reasonably similar, you could use that plus box 52 of your T4(s) to get an estimate.


If you want to run through the calculation yourself, click on the "chart 3" hyperlink of this URL to see the full blown details of what's included in "earned" income, as well as how to do the calculations.
http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/rrsp-reer/cntrbtng/lmts-eng.html


Cheers


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## amitdi (May 31, 2012)

Eclectic12 said:


> Assuming the $18K was on your 2012 NOA, under Part A of "Your 2013 RRSP Deduction Limit" and with the $12K contribution in 2013, you started 2014 with $4K plus whatever RRSP room was earned in 2013. So likely, you will need at least $6K earned RRSP contribution room from 2013.
> 
> Without knowing if you have a pension - it is difficult to say if you have over-contributed or not.
> 
> ...


Thanks Eclectic. I did the calcs and I will have $3.5K at the end of 2013 (after deducting pension) and I will earn more than 10K based on 2013, so I am good here.


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## Eclectic12 (Oct 20, 2010)

amitdi said:


> Thanks Eclectic.
> 
> I did the calcs and I will have $3.5K at the end of 2013 (after deducting pension) and I will earn more than 10K based on 2013, so I am good here.


That's what I figured ... but anytime I miss mentioning other possibilities, that usually guarantees that the poster is the exception. :rolleyes2:


Cheers


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