Hi guys,
I need clarification about RRSP limit.
My notice of assessment of year 2007 indicates $X thousands limit for RRSP contribution.
I have already contributed $X thousands in RRSP during year 2008.
As per income of year 2008, I would get new contribution limit of $Y thousands (18% of year 2008 income).
Can I contribute this $Y thousands in RRSP (before Feb 2009) and save tax on $X + $Y thousands investment in RRSP when file tax return of year 2008?
(As per my knowledge, answer is NO and $Y thousands can be claimed in tax return of 2009 or later years.)
My friend created this confusion and I just need clarification.
If I am right, what would happen to my friend as he has invested $Y thousands in RRSP in Jan 2009?
Does he need to pay penalty? (I think he do not need to pay any penalty if he won't claim in tax return of year 2008. If he would have invested in year 2008, he has to pay penalty. Am I right?)
Thanks
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Location: carl sagan's universe
Posted on: 12-01-09 00:13:01
Quote:
Originally posted by meitsme
Hi guys,
I need clarification about RRSP limit.
My notice of assessment of year 2007 indicates $X thousands limit for RRSP contribution.
I have already contributed $X thousands in RRSP during year 2008.
As per income of year 2008, I would get new contribution limit of $Y thousands (18% of year 2008 income).
Can I contribute this $Y thousands in RRSP (before Feb 2009) and save tax on $X + $Y thousands investment in RRSP when file tax return of year 2008?
(As per my knowledge, answer is NO and $Y thousands can be claimed in tax return of 2009 or later years.)
My friend created this confusion and I just need clarification.
If I am right, what would happen to my friend as he has invested $Y thousands in RRSP in Jan 2009?
Does he need to pay penalty? (I think he do not need to pay any penalty if he won't claim in tax return of year 2008. If he would have invested in year 2008, he has to pay penalty. Am I right?)
Thanks
NOAs do not usually give contribution limit only deductible limit. Please check your NOA and you will see the word DEDUCTIBLE very clearly.
If you search the site you will see your question answered very clearly.
However once again in short:
Contribution limit right now from Jan 2009 onwards is dedcutible limit plus 18% of 2008 income (upto a limit of $20000) plus return of home buyer's plan (if any) minus the unused room (your NOA will give you that amount).
If your pal has contributed 18% of 2008 income he cannot claim that in 2008's tax return but he will not be penalized. Had he invested in 2008 also he would not have been penalized so long as it was along the way from their paychecks. Many people do this esp where their company matches their contribution.
Hope that answers ur questions
investpro, I am agree with you.
But my friend went to TD bank again and he confirmed that he can ask for tax credit on $X + $Y thousands amount when file tax return of year 2008.
Banker told that they are doing daily basis and you can inquire to CRA if you want. Banker shows confident to him. (I doubt on bankers knowledge. I may be wrong)
Do you know any document/form/information on CRA website that proves us right?
I would like to confirm that because if my friend is right, I would like to take an advantage too.
Thanks
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Success is Never Ending and Failure is Never Final.
Quote:Yes
Originally posted by meitsme
Can I contribute this $Y thousands in RRSP (before Feb 2009)
Quote:No, in your 2008 return, you can only deduct $x.
and save tax on $X + $Y thousands investment in RRSP when file tax return of year 2008?
The $y (even though contributed before Feb 2009) can only be deducted in your 2009 return or later.
Quote:Nothing will happen - the money will grow (hopefully) or reduce - depending on how it is invested.
If I am right, what would happen to my friend as he has invested $Y thousands in RRSP in Jan 2009?
No tax implication.
Quote:There shouldn't be any penalty.
Does he need to pay penalty? (I think he do not need to pay any penalty if he won't claim in tax return of year 2008. If he would have invested in year 2008, he has to pay penalty. Am I right?)
As Investpro mentioned a lot of people are set up this way who have automatic deductions from their paychecks, plus employer contributions.
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Thanks pratickm.
One more question.
If someone contributed $5000 in RRSP in year 2008 (within his limit) and he has only one contribution receipt of $5000.
Can he claim for refund on $3000 in tax return of year 2008 and $2000 in tax return of year 2009?
if yes, which receipt he suppose to attach with tax return of year of 2008 and year 2009 (consider paper application)?
Thanks,
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Success is Never Ending and Failure is Never Final.
Any comment on my previous post?
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Success is Never Ending and Failure is Never Final.
Quote:
Originally posted by meitsme
Thanks pratickm.
One more question.
If someone contributed $5000 in RRSP in year 2008 (within his limit) and he has only one contribution receipt of $5000.
Can he claim for refund on $3000 in tax return of year 2008 and $2000 in tax return of year 2009?
if yes, which receipt he suppose to attach with tax return of year of 2008 and year 2009 (consider paper application)?
Thanks,
What ever you contribute in 2008 after the first 60 days and in the first 60 days of 2009 has to be reported on your 2008 tax return and corresponding receipts have to be attached with the 2008 return.
This / These contributions will be noted by CRA as your contribution(s) towards your RRSP in the year 2008. Now you have the liberty to deduct this / these contribution(s) in 2008 return in full or part there of or in any of your future tax returns.
When you receive the 2008 tax year NOA from CRA, it would show that the contribution(s) made by you as $5000 (or what ever amount), deduction claimed as $3000 (or what ever amount from $0 to $5000) and undeducted contribution of $2000 or whatever remaining to be deducted in any future year return.
I hope it clarifies.
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Pramod Chopra
Senior Mortgage Consultant
Mortgage Alliance Company of Canada
