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.

Though the majority of Canadians will not reach their RRSP contribution limit this year, it is important to understand how it is calculated and where to find the information.

You begin earning RRSP contribution room as soon as you begin filing a tax return. So if you worked at a burger joint when you were 16 and filed a tax return, this income was used to help calculate your RRSP contribution amount even though you were too young to actually open an RRSP. This is one reason we encourage younger Canadians to file their tax return, even if they only earned a little income during the year.

Your RRSP contribution amount is calculated each year as 18 per cent of your earned income up to a maximum amount. The maximum amount for 2011 is $22,450, which would affect only those taxpayers whose earned income is more than $124,722. If you do not use your contribution room in one year, you can carry forward the amount indefinitely. You do not lose it if you do not use it. Most people can start building contribution room as soon as they begin their careers, and they will have room available later when they are earning more income.

Your RRSP contribution limit is on your Notice of Assessment (NOA). The NOA is the summary of your tax return sent to you by the Canada Revenue Agency (CRA). If you cannot find your NOA, you can always call the CRA at 1-800-959-8281 to ask for the amount. But you need to have your SIN and last year’s tax return handy in order to access the information.

You are allowed a $2,000 over-contribution without being assessed a penalty, but you cannot deduct this amount. If you exceed it, there will be a penalty involved. If you have over-contributed, make sure you withdraw the excess as quickly as possible. If you get the excess certified by the CRA using Form T3012A, you can withdraw it without the financial institution having to withhold tax.

All this changed in 2008 with the introduction of Registered Disability Savings Plans (RDSPs). The only eligibility requirement for opening a RDSP is that the beneficiary of the plan must qualify for the disability tax credit. Unlike RRSPs, contributions to RDSPs are not deductible. However, income earned in the plan is not taxed until it is withdrawn. Family members, friends or beneficiaries can contribute to the plan up until the year in which the beneficiary turns 59. The maximum amount that may be contributed over the lifetime of the DPSP is $200,000. Withdrawals must begin in the year in which the beneficiary turns 60.

An especially attractive feature of the plan is that the government will also make contributions in the form of Canada Disability Savings Grants (CDSGs). The amount it pays will be based on the family’s net income (or, if the disabled beneficiary is 19 or over, the beneficiary’s income). If net income is less than $83,088, it will pay $3 for every $1 of the first $500 contributed and $2 for every $1 of the next $1,000 contributed. For families with net income of $83,088 or more, it will pay $1 for every $1 contributed, to a maximum of $1,000.

Families with income less than $83,088 which contribute $1,500 in any one year will therefore receive $3,500 in grants to the plan. Grants are paid until December 31 of the year the beneficiary turns 49, to a lifetime maximum of $70,000. Once the beneficiary reaches 60 and starts making withdrawals from the plan, the portion relating to the grants will be included in income.

For families with net income less than $24,183, the government will also contribute a $1,000 Canada Disability Savings Bond (CDSB), even if no one contributes anything to the plan. Families with net income between $24,183 and $41,544 will receive a partial bond. The government will pay a lifetime maximum of $20,000 in CDSBs.

If you are kicking yourself for not having opened an RDSP already, you can relax. Prior to 2011, RDSP beneficiaries were unable to carry forward any unused entitlements to future years. However, the government will now allow a 10-year carry forward of CDSG and CDSB entitlements arising in 2008 and subsequent years. Taxpayers who qualify for the full CDSG entitlement may therefore open a plan now and receive $17,500 by contributing $1,500 for each of 2008, 2009, 2010, 2011 and 2012. Taxpayers who qualify for the $1,000 bond will receive $5,000 just by opening an RDSP. You do not often see deals like this.

In order to make sure all this money stays in the RDSP where it belongs, any withdrawal will trigger a repayment of all CDSGs and CDSBs received in the preceding 10 years. However, effective for 2011, an exception has been made to this rule for taxpayers with life expectancies of five years or less. The maximum they can withdraw per year without triggering a repayment will be $10,000 in taxable plan savings, plus a pro-rated amount of plan contributions.

RDSPs are available at participating financial institutions. If you have reached the age of majority and qualify for the disability tax credit, you can open an RDSP yourself. In the case of minors, the plan must be opened by the legal parent or guardian or by an individual or public agency legally authorized to act for the minor.

If you are filing your own return, NETFILE does have a few rules before you can file. First, you should receive a code on the front page of the T1 package sent to you by the CRA. If a third party prepared your return or you e-filed last year, your T1 package will only be the one page. If you do not have a code or you can’t find it, you can contact the CRA.

First-time filers cannot use NETFILE. The same applies to people who are new to Canada in 2011. You need to have a history with the CRA to be able to file electronically. If your address is outside of Canada, you cannot use NETFILE, and estate returns cannot be sent in using NETFILE either. Also, NETFILE will only accept current-year tax returns, so if you missed filing last year you cannot file your 2010 and 2011 returns at the same time. You will have to mail your 2010 tax return to the CRA for processing.

There are other restrictions depending on the complexity of your return, so make sure you qualify before hitting Send. And remember, the NETFILE system will close at the end of September, so if you really want to procrastinate on your filing you may want to consider that deadline.

For taxpayers using the system, make sure you keep a record of your confirmation number once your return is accepted. This will be handy in case there are any questions about your return. You should also keep your documents handy. You may not submit them with your return, but the CRA can ask for back-up once they begin reviewing returns over the summer. If you do not have the right slip or receipt, your claim will be denied.

And if you wait until April 30 to file, the system will most likely be busy. The last few days of tax season are usually the busiest for NETFILE and the system can slow down. Though it is human nature to procrastinate, it is better not to leave it until the last minute.

We are recommending people file three years of 1040 Forms to report their income if they do not owe tax, and six years if they do. In most cases, the Canadian tax paid is enough to cover any U.S. obligations. However, tax-free income in Canada may not be exempt under the Internal Revenue Code. This would include gambling or lottery winnings and undistributed earnings inside a Registered Education Savings Plan (RESP) and Tax Free Savings Accounts (TFSAs).

U.S. citizens are required to file a 1040 Form every year they meet the minimum income limitations, which is about $9,500 for a single person, $3,700 for a married person filing separately and about $19,000 for married people filing jointly. This would include all world income. All of your income is taxable in the U.S. but the Canada-U.S. Tax Treaty allows for some benefits to avoid double taxation.  You do receive foreign tax credits for taxes paid in Canada. As a U.S. citizen, you have the responsibility to file, but you are also entitled to some credits, such as the economic stimulus payments and the Making Work Pay credit of $400 per adult for previous tax years. There is also the additional child tax credit which is a refundable $1,000 credit available for each child. But the credits depend on your level of earned income, so not everyone qualifies.

The 1040 tax return also includes a few filing requirements that don’t attract any tax. The first is the 8891 Form for Canadian Registered Retirement Savings Plans (RRSPs); this allows you to defer income from the RRSP until the time you take it out in Canada, so it is taxed in both countries at the same time.

For U.S. citizens living in Canada with Tax Free Savings Accounts (TFSAs) and Registered Education Savings Plans (RESPs), you will need to complete Forms 3520 and 3520A for foreign trusts which you will have to file every year. There is also Form 5471, required for any U.S. person who owns more than 10 per cent of the shares in a foreign corporation or is an officer or director. This form basically creates a U.S. statement for your Canadian corporation to keep track of income you are sheltering in your corporation, until you take it out and pay U.S. tax on it. Failure to file this form could result in a penalty of up to $10,000.

If you are tackling the forms yourself, the IRS estimates the process takes can take more than 30 hours to complete. This includes more than 22 hours to complete the 1040, three hours and 17 minutes to complete the F1116 (foreign tax credit) form and half an hour to assemble the paperwork. In most cases, you are not required to submit documentation with a U.S. return. The exception would be when U.S. tax has been withheld at source and is reported on a U.S. tax slip. Once you have caught up on your tax returns, you should hold on to your records for a minimum of six years.

Remember, there are 100 ways to complete a U.S. return correctly but there is one best way to maximize your tax savings. You need to understand the tax treaty and when the treaty supersedes the Internal Revenue Code. In most cases, it is beneficial to prepare your U.S. and Canadian returns together, so you can figure out the best bottom line between the two.

The 13-week requirement has been challenged in the past. In 2010, Ferre v The Queen 2010 TCC 593 saw a taxpayer argue that his online MBA program through the University of Liverpool qualified since he took four courses that were six weeks each. The court disagreed, finding the 13-week requirement applied to the individual courses, rather than the entire program.

Considering an online MBA is a degree and the program lasted 24 weeks in total, this does not seem reasonable. And a 2011 tax court ruling seemed to agree. In Siddell v The Queen 2011 TCC 250, a judge disputed the reasoning in Ferre and allowed another taxpayer enrolled in the same online course to appeal the decision.

Now the rule has been changed to three weeks starting on the 2011 tax return. So if you are studying outside of Canada, you may be able to claim some or all of the student tax credits, depending on your program, as long as the program lasted three weeks. The same rules apply whether or not you can claim tuition as well as the education and textbook amounts. In order to qualify for the education and textbook amounts, your courses need to lead to a degree. So, if you decide to go to a university in Italy to take a month-long course as part of your summer vacation, you will still not qualify.

In order to claim your credits, your university or college must complete a TL11A Form Tuition, Education, and Textbook Amounts Certificate – University Outside Canada. The form is included in the student’s tax return, so the school does not send it to the Canada Revenue Agency. The school cannot use its own country’s tax forms instead of the TL11A. The Canada Revenue Agency (CRA) will not accept it.

Remember, the TL11A Form is for the calendar year. So, if you started your program in September 2011 then the amount shown should only be for the first semester of your studies.

And if you have tried to claim tuition or other student credits for a program abroad and been unsuccessful, you may want to watch the appeal in the Siddell v The Queen case. If the taxpayer is successful, it may open the door to appeal pre-2011 re-assessments of other courses or programs.

To qualify for the caregiver amount, the person must live with you and you need to be responsible for maintaining the home. So if you are supporting elderly parents but they are not living with you, you cannot claim this credit.

If you are supporting a dependant other than a parent or grandparent, he or she must be older than 18, depend on you because of a physical or mental infirmity and earn less than $18,906 annually. For example, one of my clients was supporting a 25-year-old daughter with muscular dystrophy. The daughter qualified for the Disability Tax Credit and transferred it to her parents, but they didn’t realize they could also claim the caregiver amount.

If the relative who is living with you is a parent or grandparent age 65 or older, he or she does not have to be infirm. If your elderly mother moves in with you and she earns less than $18,906 during the year, you are now eligible to claim the caregiver amount for her. It can also be your spouse’s or common-law partner’s mother who moves in. You are allowed to split the credit but you cannot claim more than the maximum amount of $4,282 for the dependant, which is about $640 in tax savings. If the dependant’s income is less than $14,624, you can claim the full $4,282. If the dependant’s income is greater than this amount, it is gradually phased out.

If you are caring for a spouse, the caregiver credit does not apply even if the person earns less than the minimum. The Tax Act assumes that spouses will take care of each other. However, you may be able to claim the spouse or common-law partner amount.

I have spoken with many clients who think that the Canada Pension Plan (CPP) benefits will make up for a lack of retirement savings. Unfortunately, this is not the case. The CPP is designed to replace about 25 per cent of your average pre-retirement employment earnings, up to a maximum amount. So if you are planning on CPP to keep you entirely comfortable during your retirement years, you may want to re-think your financial plan.

Recent changes mean more flexibility for Canadians choosing to work a little longer, as working past 65 will now bring greater benefits. Before, CPP increased your retirement pension by 0.5 per cent for each month you delayed taking the payments after age 65. So, if you decided to take CPP at 70, your pension was 30 per cent more than it would have been if you took it at age 65. Under the new rules, that same delay will give you a 42 per cent increase. Also, if you are between 65 and 70, still working and receiving CPP retirement pension, you will have the option of not contributing to CPP any longer. But any additional contributions would work to increase your monthly benefit.

The previous rules required people between 60 and 65 who wanted to start receiving retirement pension early to stop working for at least two months. It didn’t mean they couldn’t go back to work later but if they did, they didn’t have to resume contributing to CPP. This has changed as well. You do not need to stop working to start receiving retirement pension from CPP but you have to continue to make contributions even if you are working. This is no longer optional. The good news is there is a benefit to paying more money into CPP: additional contributions increase CPP benefits as part of the new Post-Retirement Benefit (PRB).

But if you want to retire early, benefits are reduced. Under the previous system, if you retired at age 60 your pension amount was 30 per cent less than if you had waited five years. Since January 1, 2012, the system will gradually change and the reduction will move from 0.5 to 0.6 per cent per month. It doesn’t sound like much but it means your pension would be reduced by 36 per cent, rather than the previous 30. This may or may not change your retirement plans, depending on how much you rely on CPP for income.

People who are out of the workforce for a number of years will be helped by the new system. Now you can drop up to 7.5 years of zero- or low-income earning years from your benefit calculation. So, if you were a stay-at-home mom, family caregiver or you travelled for a period of time, those years can be ignored, resulting in a few extra dollars of CPP.

For more information about CPP and how benefits are calculated, please see http://www.servicecanada.gc.ca/eng/sc/cpp/retirement/canadapension.shtml.

First of all, a TFSA is not like a Registered Retirement Savings Plan (RRSP); you do not receive a tax deduction for a TFSA contribution. But according to the survey, 35 per cent of Canadians were unsure on this point. There is a tax benefit, but it is different: you do not report the income within the TFSA on your tax return. This is because you do not pay tax on that income.

Understanding your contribution room is another major problem. The ING Direct survey showed 23 per cent of Canadians thought their bank is responsible for tracking TFSA contributions or withdrawals. And 12 per cent thought the government should do it. Although the CRA does track contributions, the taxpayer is ultimately responsible for ensuring that he does not over-contribute.

The main problem is figuring out the contribution limit. Once you turn 18, you receive $5,000 of TFSA contribution room every year. The key is you can only add funds totalling $5,000 in one calendar year. If you deposit $5,000 in June and take out $1,000 in September, you will have to wait until January of the next year to re-contribute the $1,000.

You cannot treat your TFSA like a regular savings account: the number to watch is not the ongoing balance but rather how much money in total you have deposited.  Some people found this out the hard way in the first year, when the Canada Revenue Agency (CRA) sent letters detailing an over-contribution and resulting penalties.

Your Notice of Assessment should include your TFSA contribution limit, as well as the summary of your tax return and RRSP contribution room. But the CRA is only a collector of data from the banks and financial institutions. So make sure you keep records and know your contribution limits. This is especially true if you have multiple TFSA accounts.

Students are allowed to claim the education amount for each month they are in school. This credit is meant to provide some help with the living expenses involved with going to school, but it is a flat-rate amount, dependent on the hours you spend in classes. Students often ask if they can claim their rent, food or residence fees as part of their education credits. The answer is usually no. Ontario and Manitoba have rent credits but these are not unique to students.

Full-time students can claim $400 per month and part-time students $120 per month. The number of months you are allowed to claim is indicated on your T2202A Form. Remember, your tax return is for the calendar year, so if you attended school from September to December, your T2202A Form will indicate four months. And you can claim partial months if you started late or finished early.

The education amount is a non-refundable credit. That means being in school for eight months does not result in a $3,200 refund. Instead, the amount is calculated by multiplying the total by 15 percent. So, being in school full time for eight months will result in about $480 in tax savings ($400 x 8 x 15%).

Remember, you can only receive a tax refund if you have paid taxes during the year. If you don’t use the education amount on your return, you can carry it forward along with your unused tuition fees to use in years when you are earning more money. The carry-forward amount should be on your Notice of Assessment.

Even if you are working while going to school, you can claim the education amount if you are taking a course related to your job. But if your employer paid for your course, then you are not allowed to claim the education amount. Other students who may not be able to claim the amount include grant recipients (other than recipients of grants under a federal or provincial student loan program), students who receive a benefit as part of their program or someone who received an allowance.