M & Ms. Pressé

M & Mrs. Pressés and their Reer.

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This is not a whim of the accountant!

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For those who contribute to an RRSP on a regular basis, your file is often delayed because you do not have a receipt for your contributions for the first 60 days of the year. Yes, it's frustrating! But being assessed contributions later when you haven't respected the rules is even more frustrating!!

 

GREEN 😊

March 1, 2023 to December 31, 2023 (rest of 2023)

Receipts for the current year

GREEN 😊

January 1, 2024 to February 28, 2024 (first 60 days of 2024)

Receipts that you must present for the 2023 declaration. If you bring this receipt next year, we will not be able to apply these receipts to the year 2023 and we will have to make a request for correction.

YELLOW :-/

January 1, 2023 to February 28, 2023 (first 60 days of 2023)

We must request a correction for these receipts in order to avoid processing delays for your current return. Please contact us as soon as possible.

YELLOW :-/

 

March 1, 2022 to December 31, 2022 (rest of 2022)

We must request a correction for these receipts in order to avoid processing delays for your current return. Please contact us as soon as possible.

RED ☹

 

Received from periods before February 28, 2022

We must file a correction request, but it will be made AFTER the current tax period.

 

 

 

 

Contributions to a Registered Retirement Savings Plan RRSP

 

If you contribute to an RRSP, this column is for you. Every year we answer many questions about the rules for applying RRSP contributions.

 

Reversing bad habits is not an easy thing and this column is always relevant when we serve new customers.

 

The Canada Revenue Agency has put its files in order, and the time is over when you could apply RRSP contributions as you see fit.

 

We will not discuss here the advantages of contributing to an RRSP, since banks and other financial institutions bombard us extensively with advertising on this subject, particularly during the first 60 days of the year.

 

 

 

A little history

 

The Registered Retirement Savings Plan has been in existence since 1972. An RRSP is a plan that you established and that the CRA registered, and to which you or your spouse or common-law partner contribute. Deductible RRSP contributions can be used to reduce your taxable income.

 

The rules

 

There are very specific rules for deducting your RRSP contributions.

 

The CRA requires that you present in your tax return your contributions made between March of the current year and the first 60 days of the following year. You can deduct all of these contributions or carry forward a portion to a future year, but be careful!! to be carried forward to a future year, they must first be declared in the correct year.

 

You must remember that it is very important to submit contributions correctly in the correct tax year.

 

The contributions that can be deducted are spread over two periods:

• the first, the contributions made from March to December which we call the contributions of the current year.

• the second, the contributions for the first 60 days of the year following the tax year.

 

If in 2023 you contributed $100 monthly to an RRSP, you will receive a receipt for $1000 for the year 2023 and subsequently another receipt for $200 for the months of January and February 2024 to total $1200. These two receipts must be presented for the 2023 tax year.

 

A common mistake to avoid

 

Many people keep the receipt for the first 60 days of the year for the following year, presenting contributions from January to December. This practice is no longer tolerated by the CRA and they categorically refuse the deduction if the receipts are not presented in the correct tax year.

 

Previously, it was a common practice to deduct contributions from previous years so that the taxpayer did not lose his deduction. The CRA tolerated this practice because it did not have the tools necessary to verify the accuracy of receipts.

 

Since 2004, financial institutions have been required to provide a copy of the RRSP receipt to the Canada Revenue Agency, and consequently, they can compare your deducted contributions and the information provided by the financial institutions. When there is a discrepancy, governments correct to their advantage and taxpayers ultimately lose out.

 

New habits

For Mr and Mrs Pressé

 

Take the case of Mr. and Mrs. Pressé, they were awaiting a significant tax refund each year. They kept their RRSP receipts from the first 60 days of the current year and took them to their accountant the following year.

 

Since this practice is no longer accepted, the accountant had to find a solution to satisfy his client. There are two solutions for Mr. and Mrs. Pressé.

 

The first is patience and waiting until you have all the documents to file the tax returns.

The second solution is to claim the deduction of the receipt which arrived after the declaration was filed and subsequently request an adjustment request.

 

 We believe that the first choice is the best solution, the gamble is not worth the effort. Let’s look at a common procedure for correcting an additional RRSP contribution.

 

• A couple showed up on March 20 with the RRSP receipt they received the previous week.

• The overwhelmed accountant makes an adjustment request which he sends to the CRA at the end of March.

• The processing time being two to four weeks, the ARC being also overwhelmed, however, proceeded with the correction request on May 20.

• The couple subsequently received a new notice of determination for the GST and tax benefits, because the net family income was modified by this correction.

• It is important to have the federal correction request accepted before proceeding with the Revenu Québec correction, although it is not obligatory. Since RRSPs are under federal administration, Revenu Québec grants RRSP modifications only if the correction is accepted at the federal level. If you send your request for corrections simultaneously to the CRA and Revenu Québec and the latter process your request before the CRA, Revenu Québec will delay your request for corrections, you are back to square one.

• The forward-looking accountant makes a copy of the corrected notice of assessment from the CRA, attaches it to the request for corrections from Revenu Québec and sends everything on June 1st.

• “Vacation for all” period, our couple will finally receive their last reimbursement from Revenu Québec around September 1st.

 

It's up to you to decide what's best for you!

 

You must also be aware of the costs of making such a correction, the additional fees of the accountant (who does not work for free!), the processing costs for the tax authorities.

 

Several credits and social programs are affected by this type of correction and there is always a risk that the results differ and new monitoring must be done subsequently.

 

This is why patience is required; you may find that it is better to wait one or two weeks instead of rushing to file a return. Taxation and the procedures related to it are not always easy to understand, we have developed a series of questions and answers which will make it easier for you to understand the RRSP mechanism.

 

FREQUENTLY ASKED QUESTIONS

 

My employer deducts an amount from each paycheck and I don't yet have my receipt for the first 60 days of 2024. Can I use my pay stubs as proof?

 

To process and send electronically we must have in our possession the official receipt from the financial institution, in addition to ensuring the correct amount contributed. As a preparer we are required to have all receipts on file.

 

I called my bank (or other institutions) to get my official receipt, I got the answer that I would only receive it around mid-March and with your processing time I will have to wait again, I am disappointed, what can you do?

We have no control over financial institutions and some organizations offer official receipts that you can download online. You have the choice not to present this receipt and request a correction later with the consequences mentioned above, this will involve changes to your tax and, if applicable, your social programs. You will also have to wait a few months for everything to be sorted out and you will have to manage all this correspondence. In our opinion, this is not the best solution. You cannot keep this receipt and apply it for the next year.

 

 I have been doing business with you for several years and I always contribute the same amount to my RRSP or almost, my bank is slow to send my last receipt, can you prepare and send my declaration anyway and I will bring the receipt later ?

 

Unfortunately no, we are prohibited from transmitting a declaration electronically without having all the documents on hand and keeping a copy on file. If we fail to comply, we risk losing our preparer license and our livelihood.

 

I spoke with the person who sold me my RRSPs, I told her about my contributions for January and February 2024 and she told me that we did not have to provide you with a receipt immediately and that I could even accumulate my contributions and even apply them later? Who to believe?

 

You could invite this person to consult the CRA guide T4040 as well as the “Schedule 7” form which clearly explains the RRSP procedures. As tax preparers, we have a responsibility to apply the laws and regulations correctly. It is true that you have the possibility of accumulating RRSP contributions and claiming the deduction in a future year, however you must present the receipts each year.

 

 I talked about what you require for RRSPs and several people have never respected that and never had a problem with taxes?

 

It's possible, but the past is no guarantee of the future. We prepare taxes for more than 6,000 people per year and therefore we are aware of the procedures that governments apply through numerous examples from our clientele.

 

I contributed to my RRSP at the last minute, I made a contribution of $2000, my bank gave me a temporary document which proves that I subscribed this amount, can you process my declaration now, or should I wait?

 

Preferably we would like you to wait, but we can accommodate you, but under certain conditions, in your case we know that you have subscribed an amount which is fixed, we will proceed with the preparation as if we had your receipt and when we have the official receipt on file, we will then send your declaration.

 

 Unlike those who contribute periodically or through payroll deduction, we cannot know the exact amount of the receipt. When there are discrepancies, it affects the bottom line of both the taxpayer and the spouse. We must charge a reprint fee.

 

In conclusion, if you contribute to an RRSP periodically, you will now have to be more patient when preparing your return. You should be aware that a correction for an RRSP is handled differently and that you should resort to this solution as a last resort.

 

Catherine Senia,  catherine.senia@live.ca       www.gestiondici.com       

Gestion Dici S.E.N.C, 459 saint-Jean Baptiste, Salaberry-de-Valleyfield, QC, J6T 2B4. Tel: 450-601-4160