cllb2

Hi

Sorry for another tax query.

We just got our notice of assessment, and they have given my husband a refund of nearly $1100 less than what was originally calculated.

They explained on the beet that they have "adjusted your RRSP/PRPP deductions from $2,759 to $, which is the maximum allowable"

Huh?!

This has me confused. My husband paid $2759.82 in RRSP contributions last year - so why have they told him he cannot claim tax back on those?!

At the bottom of the deduction limit statement it says "you have $2759 of unused RRSP/PRPP contributions available for 2014"

If I am reading this right, does this mean that, despite the contributions being made in the 2013 tax year, he cannot claim the refund for that year, and has to wait until 2014 tax return?! Following that, then his RRSP contributions from this year won't be available for deduction until 2015 tax return!!!! So we'll have to file ANOTHER tax return for 2015 despite not having worked in the country at all that year! That seems ridiculous to be

JonboyE

Did he have suficient contribution room in 2013 for the $2,759?

cllb2

We couldn't find a definite place to calculate that. He started paying RRSP in May, and it was his first year paying it as it was out first year here

JonboyE

That is the problem then. The amount you are allowed to contribute to an RRSP is a function of your earned income in previous years. As your OH had not earned any income in Canada in 2012 (or earlier?) he would have no contribution room in 2013. Therefore the CRA will deny the deduction.

Find his 2014 contribution room from his tax return. This year the maximum he should contribute is his 2014 contribution room less $2,759.00. He will then be able to deduct both for his 2014 tax return.

cllb2

Ah! I see! So we'll be able to catch up for the next tax return. It looks like $18,753 for next year. Do the payments to SUnLife stop automatically when he gets to this or do we need to keep an eye on it?

Thank you so much!

JonboyE

You need to keep an eye on it. It annoys me that companies like Sun Life don't verify that a contributor has available contribution room before they accept the cash, but they don't.

Novocastrian

If it's $18,753 for next year he's earning about $120K? That's OK but beware that RRSP contributions max out at 18% of income or $23850, whichever is smaller. So, if and when he's earning more than about $135K he can't put more than the ~$24K into an RRSP.

cllb2

Thank you! I shall certainly keep an eye on it. Though, saying that, I imagine he stops contributions when we leave in July anyway so hopefully won't have to do too much!

Novocastrian

Oh, I see. Not an issue then. But quite what happens to RRSP contributions made over such a short period (May 2013 - July 2014) is quite beyond my power to discern.

One for JonBoy that.

JonboyE

TBH, unless there is free money on offer from employer matching, I wouldn't bother for just one year.

If there is then he should max out his contributions this year to get the maximum tax refund here. Then withdraw the whole amount from the RRSP in 2015. There will be a 25% withholding tax, but it will not be taxed in the UK. If he is on $100+ in Canada he will likely be on 40% in the UK so he can contribute the withdrawal to a UK pension and get a 40% refund of his UK tax.