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RRSP in the first 60 days and using it in the next year
April 5, 2018
7:07 pm
kajan27
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I have deposited 25k to RRSP on February 15th, 2018. The plan is to withdraw it after 90days (May 20th 2018) and use it for down payment for my first house purchase. So I take advantage of first home buyer RRSP benefit.

Further, my income for 2017 is 81k and 2018 is expected to be 125k. So the plan is to use that 25k RRSP towards 2018 tax return.

I have done the 2017 tax on March 30th 2018. In that one, I have asked my tax professional not to put the RRSP receipt for 2017 tax return.

Now I came to know that If I have deposited in the first 60 days of 2018, it should have been put to my 2017 tax and the solution is to do an adjustment to my 2017 tax.

Available contribution room for 2017: 24k
Available contribution room for 2018: 39k

Can anyone please let me know, is there any way I can use that 25k RRSP towards my 2018 tax instead of 2017 tax?

Thanks in advance

April 6, 2018
9:22 am
Londonguy
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First let's be clear about what the rules are, and then you can clarify as to what your preparer did

You must report the contribution that you made in February 2018 on your 2017 return (line 3 in Part A on Schedule 7) but that doesn't mean you have to claim it in 2017 (line 15 in Part C, which in turn leads to line 17 of that schedule, and then ultimately Line 208 on your TD1)

So, if your tax preparer reported it (as required by CRA) but didn't claim it against your 2017 taxes (as you instructed), then everything has been done properly as per your stated plan and there's nothing you need to adjust. The amount remains eligible to be fully deductible in the 2018 tax year

OTOH if your tax preparer actually claimed it in 2017 contrary to your instructions, then you will have to file a correction to undo their mistake

April 6, 2018
5:24 pm
Rick
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Londonguy is right. I did this for the first time this year. If your preparer did it properly, the 2018 contribution would have been reported as in the first 60 days of 2018, but is deducted as a carryover for deduction next year. Kind of weird but all works out at the end of the day.

April 7, 2018
8:22 am
kajan27
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Thanks Londonguy and Rick for your replies. So I understand that If I have reported it in 2017, I can claim it in 2018.

In my case, the tax preparer did not report it in my 2017 tax. So should I do an adjustment to my 2017 tax, by reporting it now?

April 7, 2018
8:44 am
Norman1
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kajan27 said
In my case, the tax preparer did not report it in my 2017 tax. So should I do an adjustment to my 2017 tax, by reporting it now?  

Yes, you need to file an amended Schedule 7 for 2017 with your February 2018 contributions reported on line 3 (RRSP, SPP, and PRPP contributions made from January 1, 2018 to March 1, 2018).

As Londonguy wrote, enter zero in line 15 of the Schedule 7 to not claim any of the RRSP deduction in 2017 for the contribution.

Also, no box of chocolate for the tax preparer at Christmas. He or she should know better!

April 7, 2018
8:46 am
Loonie
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Since you contributed it in 2018, you have the option of reporting it in 2018. So, no need to backtrack. Think of it as an early contribution for 2018 rather than a late one for 2017.

You might want to check on whether it has to stay there for any minimum amount of time before going into house purchase. Perhaps you already know that this is not an issue, but I simply don't know.

April 7, 2018
8:58 am
Norman1
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There is the option of deducting RRSP contributions made in the first 60 days of 2018 in 2018, or another later year, instead of 2017.

But, such contributions need to be reported in the 2017 tax return, regardless of whether or not the RRSP deduction for them is used in the 2017 tax return.

April 7, 2018
9:20 am
Bill
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Norman1 is correct, anything contributed in the first couple months of 2018 must be reported on the 2017 return, cannot be reported in 2018 or any other year.

Timing of deductions is a different process.

April 7, 2018
10:23 am
Koogie
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Also note that although it is your intention to claim the deduction on your 2018 taxes, you can carry it forward a lot longer if you find you don't need it.

ie: you don't have to claim the (full or any) amount in the next calendar year. You could claim some or all of it in 2019, 2020, etc..

April 7, 2018
1:40 pm
Loonie
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I' not saying you're wrong, but could you provide a link to show that contributions in the first two months of the year must be reported on the previous year's taxes?
It's true that I haven't made a contribution in a long time, but it's not the way I remember it. Perhaps the rules have changed but it doesn't seem logical to have to report retroactively.

April 7, 2018
3:02 pm
Rick
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Loonie said
I' not saying you're wrong, but could you provide a link to show that contributions in the first two months of the year must be reported on the previous year's taxes?
It's true that I haven't made a contribution in a long time, but it's not the way I remember it. Perhaps the rules have changed but it doesn't seem logical to have to report retroactively.  

https://www.canada.ca/content/dam/cra-arc/formspubs/pbg/5000-s7/5000-s7-17e.pdf
Schedule 7
Part A – Contributions
Unused RRSP/PRPP contributions previously reported and available to deduct for 2017 as shown on your latest notice of assessment or reassessment, or T1028, Your RRSP/PRPP Information for 2017.
Include on lines 2 and 3 below all contributions you made for the dates specified, even if you are not designating or deducting them on your return for 2017.
Include at lines 2 and 3:

• Contributions made to your or your spouse's or common-law partner's RRSP and SPP, and your PRPP;
• Amounts transferred to your own RRSP, PRPP, or SPP (also see line 14 in Part C of this schedule); and
• Contributions that you are designating as a repayment under the HBP or the LLP

Line 2 is Mar - Dec line 3 is first 60 days of 2018. That being said.. I did the taxes for a relative and noticed the same thing happened to him. Was only 500 bux so just entered it in the current years taxes with the correct date and they either didn't notice or didn't care. Might not want to take a chance.. why not just file an amendment?

April 7, 2018
3:17 pm
Bill
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You can usually amend previously assessed returns (going back 10 years) yourself by going into your MyAccount and making the change there. You'll get an updated Notice of Assessment for that year.

https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/change-your-return.html

April 8, 2018
8:11 am
Loonie
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Thanks, Rick. I was wrong, then. I hope I didn't lead anyone astray. Obviously things have changed since I last dealt with this.

I must say, it seems strange. I guess it makes it easier for the government to follow what you have done, but confusing for the taxpayer.

so, now, as I understand it, OP had 24K of contribution room in 2017 but contributed 25K.

Someone else is probably more up to date on this than I am but my recollection is that you are allowed to overcontribute up to 2K but you don't get any tax benefit from the extra amount. I presume that with this odd reporting system, that he can't put that extra 1K towards 2018 contribution room? Not sure how that gets dealt with.

April 8, 2018
9:47 am
Norman1
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No limit on RRSP overcontributions. sf-smile However, a special 1% per month tax applies on contributions more than $2,000 over one's RRSP contribution room. sf-frown

All RRSP contributions need to be reported on Schedule 7, regardless of whether or not one has the RRSP contribution room for them.

Yes, that extra $1,000 contributed in the first 60 days of 2018, above one's 2017 RRSP contribution room, can eventually be deducted under one's 2018 RRSP contribution room.

April 8, 2018
10:18 am
Rick
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Loonie said

so, now, as I understand it, OP had 24K of contribution room in 2017 but contributed 25K.

Someone else is probably more up to date on this than I am but my recollection is that you are allowed to overcontribute up to 2K but you don't get any tax benefit from the extra amount. I presume that with this odd reporting system, that he can't put that extra 1K towards 2018 contribution room? Not sure how that gets dealt with.  

I read it as he wants to apply the whole 25K to his 2018 taxes. My carry forward amount was calculated into my 2018 RSP deduction limit. After my January 1 contribution, my assessment said I had 118.00 room left for my 2018 return.

Note to the OP. HBP is a great plan if you need the money for a down payment. Keep in mind that you have to pay it back over, I think, a 15 year period. There used to be a 2 year grace period before you had to start repaying, not sure of the rules now. That means you're obligated to repay at least 1,666.67 per year to your RSP. Don't forget that you won't be able to use that 1700 as a tax deduction, so if you want to take advantage of any RSP contributions, you'll have to contribute over and above the repayment amount. That can be a bit of a hardship for a homeowner. Individual results may vary depending on your financial situation. Good Luck!

April 9, 2018
7:01 pm
kajan27
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Norman1 said

Yes, you need to file an amended Schedule 7 for 2017 with your February 2018 contributions reported on line 3 (RRSP, SPP, and PRPP contributions made from January 1, 2018 to March 1, 2018).

As Londonguy wrote, enter zero in line 15 of the Schedule 7 to not claim any of the RRSP deduction in 2017 for the contribution.

Also, no box of chocolate for the tax preparer at Christmas. He or she should know better!  

Awesome. I am not going back to that tax professional 🙂

April 9, 2018
7:05 pm
kajan27
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Thanks Bill, Rick, Loonie, Norman1, Koogie, Londonguy. I hope I have not missed anyone who has given an input here.

@Rick: I am planning to use HBP too. Waiting for 90 days to be over. I know about the 15 year pay back period and rules too. Thanks for the head sup though.

April 10, 2018
9:19 am
Koogie
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This doesn't apply to the OP but it might help someone else...

A lesser known fact is that you can use the HBP more than once as well. The rules state you are considered a first time buyer if you or your spouse did not own a home in the four years before the year you purchase a home.

For instance, my wife and I bought a house in 2006 and sold it in 2010. We then rented until 2015 and bought a house in early 2016. We qualified again as first time home buyers and withdrew 50K between us from our RRSPs.

It won't apply to everyone but for those who move with any regularity it might be worth considering.

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