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RRSP contributions: clearing up first-60-days confusion
Thousands of Canadians will make last-minute RRSP contributions to help with their 2011 tax return. But what happens if you don’t wish to claim all your contributions?
Registered Retirement Savings Plans (RRSPs) are used by millions of Canadians to save for their retirement. Some people choose regular contributions every month, while others wait until the RRSP deadline to make their contribution.
RRSPs are one of the few deductions not tied to the December 31 deadline. Medical expenses, charitable donations, capital gains, children’s arts and fitness credits and others are all limited to the calendar year. However, RRSP contributions made in the first 60 days of 2012 may be claimed on your 2011 tax return.
But the first-60-day rule also causes quite a lot of confusion. You will receive RRSP receipts for any contributions made in January and February 2012, even if you make regular monthly contributions, and those receipts must be recorded on your 2011 tax return. However, while the contributions must be recorded, you do not have to actually claim them. Instead, you may choose to claim the deduction the following year. The same applies for contributions you made from March to December 2011: you do not need to claim all your contributions if you want to save them for another year.
If you find old RRSP receipts from previous years, you cannot add them to your return this year. You will need to file an adjustment to your previous returns to claim the receipt in the right year.
The first-60-days rules is a great opportunity to save some tax money on your 2011 return, but it can also be confusing. If you want to take advantage of this option, ensure you understand how the rules work.
Cleo HamelSenior tax pro and national spokesperson
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COMMENTS
I have an |RSP acount but did not contribute for 2011. I did not get a tax receipt from my bank, only a statement. How do I calculate my reinvested income for 2011? Do I claim that RSP dividend/Interst income? Thank you.
RSP accounts are allowed to earn money tax-free until you withdraw the money (usually once you retire). You do not need to report the gains or losses that happen within your RRSP.
Hi
Doing taxes with hr right now. Person will not allow me to claim my rrsp and wants me to pay more for adjustment.
Tony – you do need to make sure you report your RRSP receipts in the right year even if you do not claim the deduction. You can file an adjustment yourself with a T1 Adjustment Form at http://www.cra-arc.gc.ca/E/pbg/tf/t1-adj/README.html. ~CH
I reinvested my earning from my RRSP (around 550) do I claim that as new RRSP on this years income tax form. For example, I purchased $500 RRSP, reinvested my initial 1000 from 5 years ago, and the 550 I earned from that RRSP. When completing ‘contributions to your own RRSP’ do I include only the new RRSP or do I also include the 550 I earned and invested into another RRSP. I’m pretty sure the 1000 I reinvested does not have any impact on that line. Clear as mud, I”m sure. Thanks for your input, Joyce
Joyce – any earnings or distributions within your RRSP are tax-sheltered and they are not considered new contributions. You should only receipt a tax receipt for any new contributions. ~CH
Hi there,
I received two RSP tax slips for 2013 – one dates February 6, the other March 6. I know I can claim them because they are within the first 60 days of 2013. Do I add up the two amounts and use that amount, or only use what’s on the March 6, 2013 tax slip? (I assume I can use the combined amount, otherwise why would they sent two tax slips?)
Skye – RRSP receipts will indicate if the contribution is for the ‘first 60 days’ or the ‘remainder of the year’. This will determine if the contribution needs to be reported on 2012 or not. If so, combine the two amounts. ~CH
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