RRSP contribution: first 60 days rule | RRSPs and RRIFs | Discussion forum

Please consider registering
guest

sp_LogInOut Log In sp_Registration Register

Register | Lost password?
Advanced Search

— Forum Scope —




— Match —





— Forum Options —





Minimum search word length is 3 characters - maximum search word length is 84 characters

sp_Feed Topic RSS sp_TopicIcon
RRSP contribution: first 60 days rule
January 3, 2020
8:51 pm
SRRSP2020
Member
Members
Forum Posts: 5
Member Since:
January 3, 2020
sp_UserOfflineSmall Offline

I withdrew money from SRRSP account in December and I am gonna contribute again in 2020. I understand the safest way is to contribute after Mar 2nd and it will become 2020 contribution and I am good. My question is if I contribute to the SRRSP account during the first 60 days of 2020, will this contribution offset my December withdrawal or it can be considered a 2020 contribution? I am trying to understand how does RRSP contributions during the first 60 days of a year work? Is it considered as a previous year contribution or the current year? Thanks so much for your time to answer.

January 3, 2020
9:25 pm
Norman1
Member
Members
Forum Posts: 3060
Member Since:
April 6, 2013
sp_UserOfflineSmall Offline

RRSP contributions made in the first 60 days of 2020 are considered to be contributions made in the first 60 days of 2020 that need to be reported in the 2019 tax return.

The RRSP deduction for such contributions can be claimed in the 2019 or later tax returns.

RRSP contributions do not "offset" RRSP withdrawals. The contributions (shown on RRSP contribution slips) and withdrawals (shown on T4RSP slips along with any tax withheld) have to be reported separately.

Details are in a previous post.

January 3, 2020
9:43 pm
maGIC
Member
Members
Forum Posts: 19
Member Since:
October 7, 2018
sp_UserOfflineSmall Offline

Recording contributions vs. claiming them

If you contributed during between March and December of 2016 or in the first 60 days of 2017, you need to indicate it on your 2016 return when you file it. But you don’t necessarily need to deduct your contribution from your overall taxable income in 2016. You might want to claim these deductions next year instead, if you’d already be getting a refund or know that you might earn more income in the future.

Quoted from:
https://www.hrblock.ca/works-rrsps-first-60-days/

January 3, 2020
11:25 pm
Loonie
Member
Members
Forum Posts: 6052
Member Since:
October 21, 2013
sp_UserOfflineSmall Offline

In terms of "offset", perhaps OP was thinking of TFSA rules, wherein you can make a withdrawal in one year and then contribute the same amount in the subsequent year or later. But that is not the case with RSPs.

January 4, 2020
7:18 am
hwyc
GTA
Member
Members
Forum Posts: 213
Member Since:
September 30, 2017
sp_UserOfflineSmall Offline

In the context of RSP, money withdrawal is also taxable. I believe the attribution rule is more complicated with a spousal plan.

January 4, 2020
10:41 am
SRRSP2020
Member
Members
Forum Posts: 5
Member Since:
January 3, 2020
sp_UserOfflineSmall Offline

Thanks to all who responded. I will rephrase my question. For example if I contributed $10K to SRSP in 2016 and my spouse withdrew $10k from that account in 2019, it will become the income of spouse and he will pay tax, if the next contribution to SRSP is in 2020. But if I contributed $5k to SRSP in 2017, the 3 yr rule is violated and the 10K withdrawal will become my income and I will pay tax. I am trying to understand the grey area of contributing this 5k to SRSP during the first 60 days of 2020. Will it violate the rule of 3 years or not?

January 4, 2020
12:04 pm
Norman1
Member
Members
Forum Posts: 3060
Member Since:
April 6, 2013
sp_UserOfflineSmall Offline

My reading of Income Tax Act 146(8.3) is that the year is the taxation year the spousal RRSP contribution was made and not the year of the tax return that the spousal contribution needed to reported in:

Spousal or common-law partner payments

(8.3) Where at any time in a taxation year a particular amount in respect of a registered retirement savings plan that is a spousal or common-law partner plan in relation to a taxpayer is required by reason of subsection (8) or paragraph (12)(b) to be included in computing the income of the taxpayer’s spouse or common-law partner before the plan matures or as a payment in full or partial commutation of a retirement income under the plan and the taxpayer is not living separate and apart from the taxpayer’s spouse or common-law partner at that time by reason of the breakdown of their marriage or common-law partnership, there shall be included at that time in computing the taxpayer’s income for the year an amount equal to the lesser of

(a) the total of all amounts each of which is a premium paid by the taxpayer in the year or in one of the two immediately preceding taxation years to a registered retirement savings plan under which the taxpayer’s spouse or common-law partner was the annuitant at the time the premium was paid, and

(b) the particular amount.

So, a spousal RRSP contribution made in the first 60 days of 2020 would be a 2020 spousal contribution as it was made in taxation year 2020.

As well, I think only $5,000 of the $10,000 2019 withdrawal from your spouse's RRSP would be your income had you contributed $5,000 in taxation year 2017, $0 in taxation year 2018, and $0 in taxation year 2019.

January 4, 2020
1:48 pm
Bill
Member
Members
Forum Posts: 1825
Member Since:
September 11, 2013
sp_UserOfflineSmall Offline

Agreed, appears the 60-day factor is not relevant, it's the calendar year the contribution was made that determines.

Here's a general example showing it's the lesser of the amount 1) contributed by the contributor and 2) the amount withdrawn by spouse, in either the current or preceding two calendar years, that needs to be included in contributor's income, i.e. attributed back to contributor:
https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/rrsps-related-plans/making-withdrawals/example-much-income-report-on-each-spouse-s-return.html

January 4, 2020
2:50 pm
SRRSP2020
Member
Members
Forum Posts: 5
Member Since:
January 3, 2020
sp_UserOfflineSmall Offline

Norman1 said
My reading of Income Tax Act 146(8.3) is that the year is the taxation year the spousal RRSP contribution was made and not the year of the tax return that the spousal contribution needed to reported in:

Spousal or common-law partner payments

(8.3) Where at any time in a taxation year a particular amount in respect of a registered retirement savings plan that is a spousal or common-law partner plan in relation to a taxpayer is required by reason of subsection (8) or paragraph (12)(b) to be included in computing the income of the taxpayer’s spouse or common-law partner before the plan matures or as a payment in full or partial commutation of a retirement income under the plan and the taxpayer is not living separate and apart from the taxpayer’s spouse or common-law partner at that time by reason of the breakdown of their marriage or common-law partnership, there shall be included at that time in computing the taxpayer’s income for the year an amount equal to the lesser of

(a) the total of all amounts each of which is a premium paid by the taxpayer in the year or in one of the two immediately preceding taxation years to a registered retirement savings plan under which the taxpayer’s spouse or common-law partner was the annuitant at the time the premium was paid, and

(b) the particular amount.

So, a spousal RRSP contribution made in the first 60 days of 2020 would be a 2020 spousal contribution as it was made in taxation year 2020.

As well, I think only $5,000 of the $10,000 2019 withdrawal from your spouse's RRSP would be your income had you contributed $5,000 in taxation year 2017, $0 in taxation year 2018, and $0 in taxation year 2019.  

Thanks so much Norman1, that is very helpful. And your second point is also very logical.

January 4, 2020
2:52 pm
SRRSP2020
Member
Members
Forum Posts: 5
Member Since:
January 3, 2020
sp_UserOfflineSmall Offline

Bill said
Agreed, appears the 60-day factor is not relevant, it's the calendar year the contribution was made that determines.

Here's a general example showing it's the lesser of the amount 1) contributed by the contributor and 2) the amount withdrawn by spouse, in either the current or preceding two calendar years, that needs to be included in contributor's income, i.e. attributed back to contributor:
https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/rrsps-related-plans/making-withdrawals/example-much-income-report-on-each-spouse-s-return.html  

Thanks Bill for your response.

January 4, 2020
4:20 pm
Bill
Member
Members
Forum Posts: 1825
Member Since:
September 11, 2013
sp_UserOfflineSmall Offline

Sorry, need to clarify my wording:

……..it's the lesser of the amount 1) contributed by the contributor to the spousal RRSP in the current and preceding two years, and 2) the amount withdrawn by spouse in the current year, that needs to be included in contributor's income, i.e. attributed back to contributor. Any remaining withdrawal amount is income of the spouse in the year it's withdrawn.

January 4, 2020
5:35 pm
SRRSP2020
Member
Members
Forum Posts: 5
Member Since:
January 3, 2020
sp_UserOfflineSmall Offline

if we look at this form and the example on the 2nd page, i think it makes more sense that the contribution made during the first 60 days of 2019 should be considered the contribution of 2019 and not the year it was deducted in (eg 2018) and same will apply to 2020.
https://www.canada.ca/content/dam/cra-arc/formspubs/pbg/t2205/t2205-19e.pdf

Norman1's explanation and reference was great. Thanks again!

January 5, 2020
10:15 am
Norman1
Member
Members
Forum Posts: 3060
Member Since:
April 6, 2013
sp_UserOfflineSmall Offline

You're welcome, SRRSP2020!

Yes, the T2205 form you mentioned aligns with Income Tax Act subsection 146(8.3). References to "year" in the form are to calendar years, which are the same as the taxation years for individual taxpayers:

Amounts from a Spousal or Common-law Partner
RRSP, RRIF or SPP to Include in Income
For the year ___________

On the line below the title of this form, enter the calendar year shown on your spousal or common-law partner T4RSP or T4RIF, or T4A slips. …

Part 1 – RRSPs and SPPs

4. Enter the total amount that your spouse or common-law partner contributed to your RRSPs and SPPs in the year you indicated above and the two preceding years.

Please write your comments in the forum.