RRSP Contribution - The first 60 days - can I use for 2007 Tax Year?

[AvalonERX]

I know that you can claim your RRSP contribution in January and February of 2007 under your 2006 Tax Return.

However, I'm wondering if you can...not claim that amount for the 2006 Tax Year, and instead, claim it under the 2007 Tax year (file in 2008)?

The reason that I'm asking is that I have a payoff package* coming to me in February.. but that amount would definately put me over the $2,000 buffer. However, if I can claim it as a 2007 contribution, I will have enough Room in my RRSP.

* I can either take after tax cash or pre-tax in RRSP contribution.

Also, if it's possible, how would I be able to do this? i.e. Don't report the T4PS on the 2006 return?

Lastly.. would I be able to split that contribution? claim a portion in 2006 and the rest in 2007?

Keep in mind, that the amount that's coming to me will exceed my contribution limit by more than $2,000.

[cadave]

Hi,

Yes, you can make a contribution in the first two months of 2007 and claim it in the 2007 Tax Year and not the 2006 Tax Year.

To do this, fill out Schedule 7 of the Income Tax Return (RRSP Unused Contributions, Transfers, and HBP or LLP Activities).

Please NOTE THE FOLLOWING AS FAILURE TO ADHERE TO THE GUIDELINES CAN RESULT IN VERY STIFF PENALTIES: Look at your 2005 Notice of Assessment and the available RRSP contribution limit for 2006.

Add $2,000 to this amount. You are NOT ALLOWED TO CONTRIBUTE MORE THAN THIS AMOUNT TO YOUR RRSP.

http://www.cra-arc.gc.ca/tax/individuals/topics/rrsp/contributing/excess-e.html

Generally, you made excess contributions to an RRSP under which you or your spouse or common-law partner is the annuitant if your unused contributions from priors years and your current calendar year contributions are more than your RRSP deduction limit shown on your latest Notice of Assessment, Notice of Reassessment or form T1028 plus $2,000.

A tax of 1% per month may apply to certain excess contributions you made in 1991 and later years that are left in the plan. However, if your unused contributions resulted from mandatory group RRSP contributions or from contributions that you made before February 27, 1995, you may not have to pay this 1% tax on all your unused contributions.

[AvalonERX]

Thanks for your reply.
I would really appreciate it if you can answer in more detail.
(Thank you so much in advance).

2006 RRSP Room per Assesment : $3,000
Buffer: .......................................... $2,000
Contributed (this month) ............ -$2,000
Remaining 2006 Room.................. $3,000

Payoff in February 2007 .............. $5,000

Based on what you said, that would put me over by $2,000.
I was hoping that the $5000 would fall under my 2007 RRSP limit.

(i.e. I have "unused room of $3,000 in 2006 and whatever my limit is for 2007)
Any chance???

I guess, what I'm really asking is whether the contribution that will be made in February 2007 can count under the contribution limit of 2007 Tax Year rather than 2006 Tax Year.

[gambit_360]

Any unused contribution you make can be deducted for ANY future year. So yes, you can deduct it in 2007 (or any other year if you wanted to).

What you want to make sure is that you do not deduct over your limit for any year. And the $2,000 buffer, you shouldn't touch. As I understand, this is a lifetime limit and only there as a safety.

[controlyar]

I guess, what I'm really asking is whether the contribution that will be made in February 2007 can count under the contribution limit of 2007 Tax Year rather than 2006 Tax Year.

yes yes yes

[cadave]

Thanks for your reply.
I would really appreciate it if you can answer in more detail.
(Thank you so much in advance).

2006 RRSP Room per Assesment : $3,000
Buffer: .......................................... $2,000
Contributed (this month) ............ -$2,000
Remaining 2006 Room.................. $3,000

Payoff in February 2007 .............. $5,000

Based on what you said, that would put me over by $2,000.
I was hoping that the $5000 would fall under my 2007 RRSP limit.

(i.e. I have "unused room of $3,000 in 2006 and whatever my limit is for 2007)
Any chance???

I guess, what I'm really asking is whether the contribution that will be made in February 2007 can count under the contribution limit of 2007 Tax Year rather than 2006 Tax Year.

I'm curious as to what the payoff in February 2007 is for. Is this a retiring allowance from a severance payout? If it is, then it does not affect your contribution room (your contribution room is essentially raised by the amount of your payout if it's because of a retiring allowance).

http://www.cra-arc.gc.ca/tax/individuals/topics/income-tax/return/completing/reporting-income/lines101-170/130/retiring-e.html


You may be able to contribute (transfer directly or indirectly) part or all of your retiring allowances to your registered retirement savings plan (RRSP) or registered pension plan (RPP). See Retiring allowances in the RRSP section for more information.

Tax will not be withheld from the part of your retiring allowance that your employer transfers directly to your RRSP or your RPP.

Tax will be withheld from the portion of your retiring allowance that is not transferred directly to your RRSP or your RPP by your employer.

If this is the case, then no need to worry :)

If not, can you explain what the payout is so I have a better idea to base my answer off of? Thanks.

[cadave]

One More Linky:
http://www.cra-arc.gc.ca/E/pub/tg/t4040/t4040-e.html#P2490_86359


A retiring allowance is an amount you receive on or after your retirement from an office or employment in recognition of long service. It includes payment for unused sick leave and amounts you receive for loss of office or employment, whether as a payment of damages or a payment under an order or judgment of a tribunal.

You can only transfer the eligible part of your retiring allowance to your own RPP or RRSP. The eligible part is $2,000 for each year or part-year of service before 1996 in which you were employed by the employer or a person related to that employer from whom you received the retiring allowance. You can also transfer an extra $1,500 for each year or part-year of service before 1989, as long as you were not entitled to receive any benefits you earned under a pension plan or a DPSP from contributions your employer made for each such year.

[AvalonERX]

The payoff is for a change to our benefit plan. We're losing retirement health care and life insurance.

A lot of people are getting the shaft. I'm under 30 and I've only been with the company for 5 years so I fiigure... I haven't really got anything to loose.

People who's been with the company for 30 years get to keep the benefit.
Anything less, you get a scaled payoff amount that max out at about $55K.

I alot of people won't have room for that lump sum payment in their RRSP.
:twisted: < taxman!

[iluvmikeharris]

And the $2,000 buffer, you shouldn't touch. As I understand, this is a lifetime limit and only there as a safety.

actually if you have the extra $, and you make sure you don't go over the $2k extra at any one time (it's a continuous lifetime limit), it's an excellent method of maximizing your tax deferred growth.

[seshwan]

Any unused contribution you make can be deducted for ANY future year. So yes, you can deduct it in 2007 (or any other year if you wanted to).

What you want to make sure is that you do not deduct over your limit for any year. And the $2,000 buffer, you shouldn't touch. As I understand, this is a lifetime limit and only there as a safety.

Although gambit is correct in his statements, that's not the question that was asked in this thread.

Contributions made in Jan or Feb 2007 can be claimed as contributions for 2006 or for 2007, your choice.

As well are you are allowed to go over your contribution limit by $2000 without any penalty, you just can't deduct it on your tax return until you have the room.

[2Addicted]

K.. all the answers so far are right.. but here's a little more on how to actually do it in practice.. ie.. filing the forms correctly.

Here is what you must do:
on the 2006 schedule 7 (for RRSP's).. make sure you tell them exactly how much you bought right up until the end of Feb... ie.. all $5,000.

Further down the form.. about 1/2 way down.. it'll ask how much you actually want to use... up to your actual contribution, or rrsp limit.. whichever is less..

so in other words... up to.. $3000 (your limit), or $5000 (your actual contribution).. whichever is less..

So then you would enter in anything between nil, and $3,000 (which then goes to line 208).

Anything you did not use.. is carryforwarded to 2007.. presto.

Hope that helps!