T2204A is no where to be found | Page 2 | Income tax filing | Discussion forum

True, Mary, that it depends on the solvency of a DB pension plan. Sears Canada and Nortel Networks retirees, unfortunately, will be/were hurt financially, though not as bad, potentially, as had been expected. An easy fix there, though: move pension plan benficiaries to the "front of the line," ahead of both secured creditors and Canada Revenue Agency. 🙂

Still, they are a "rare breed"; consequently, we need better retirement savings plans and I propose a merging of the TFSA and RRSP into a combined IRA, with no tax deduction but no "18% of previous year's gross income, less pension adjustment, subject to annually adjusted maximum dollar figure"-type thing. It'd be a flat $15-20,000 per year, per person, period. CRA should also be told "hands off; no meddling." 😉

Cheers,
Doug

Doug, I can't add anything to what Norman1 said and what I said previously, hope it's clear for you now.

Fyi, when I wrote "I'm a professional in private practice, or a business owner......" it was a hypothetical example, not my own situation, not a reflection of what kind of pension income streams I might actually have.

Thanks for the clarification, Bill. 🙂

Cheers,
Doug

Doug, in post #24 you ask a question, in post #25 you say thanks for clarifying. As Norman1 and I were trying to answer the same question I'm not clear.........?

In any event, the answer to your question in post #24 is - just claim them, whenever you decide to claim them, same as you would claim any RRSP deduction. The pile of contributed but previously unclaimed deductions can be used up as you wish whenever you want - if you want to co-ordinate that with when you draw it out as pension income then go for it.

Thanks Norman, that's what I was thinking about as one of the options but I think the different responses muddied things a bit and added to the confusion. So, when it comes time to withdraw from my RSP, when I want to withdraw those undeducted contributions, what form would I use to claim the corresponding tax credit (to offset the withholding tax that would've been paid on the undeducted contributions)? That's the only outstanding question.

Basically, undeducted contributions would be withdrawn in the year in which the RSP must converted to a RIF, or before, in a lump-sum (like in a TFSA). Remaining funds previously contributed but deducted would be converted to the RIF. Thankfully, I've got 37 years to figure this out, but thought I'd get a bit of a head start. 🙂

Cheers,
Doug

I'm not convinced yet, Bill. The points you referenced don't seem to apply after I looked at them again.

Observe my analysis:

You can deduct the amount if you meet all of the following conditions:

(1) You have not deducted, for any year, the unused contributions that you made to your RRSP, PRPP or SPP, your spouse’s or common-law partner’s RRSP or SPP

(2) You have not designated the withdrawal of the unused RRSP, PRPP or SPP contributions as a qualifying withdrawal to have your PSPA certified

(3) No part of the withdrawn contributions was a lump-sum amount from an RPP, an SPP, a PRPP, or certain DPSP amounts that you transferred directly to an RRSP, an SPP, or a PRPP. For more information, see Transferring In addition, it has to be reasonable for us to consider that at least one of the following applies.

You:
(4) - reasonably expected to be able to fully deduct the RRSP, PRPP or SPP contributions for the year you made the contributions or the immediately preceding year
(5) - did not make the RRSP, PRPP or SPP contributions intending to withdraw them and deduct an offsetting amount

In my hypothetical scenario, and it is just that (I've not got a pile of undeducted RRSP contributions), tests 1 thru 3 pass with flying colours. 4 is a bit "wishy washy," but on the same hand, likely easily proven by the fact that you did not over-contribute at any point in time (at least not over the $2000 threshold and, ideally, not at all). It shows that you had intended to deduct the amounts. 5 is also "wishy washy," but I suspect that Tax Court of Canada would like side with the taxpayer if they met 4 out of 5 "tests," and may slap the CRA for such vague wording, trying to play both sides of the fence. 🙂

Cheers,
Doug

Doug said
Thanks Norman, that's what I was thinking about as one of the options but I think the different responses muddied things a bit and added to the confusion. So, when it comes time to withdraw from my RSP, when I want to withdraw those undeducted contributions, what form would I use to claim the corresponding tax credit (to offset the withholding tax that would've been paid on the undeducted contributions)? That's the only outstanding question.

No special form. There will be the usual T4RSP issued for an RRSP withdrawal. Amount of the withdrawal and the tax withheld will be reported on the slip.

Tax withheld will be in Box 30. Box 30 amount will be added to line 437 "Total income tax deducted (from all information slips)" of the T1 General return. Tax withheld will be refunded if not needed to pay some other income tax owing.

I don't think there is a way to have no tax withheld on the withdrawal. To the financial institution, the withdrawal will be no different from a withdrawal of contributions that have been deducted.

I agree, Norman1. An example of where this is allowed is where someone makes their contribution early in the year on the assumption of a certain income that year, then loses their job and ends up not making enough income to support their original contribution amount - there's a year or two to get it back out, to "reverse" their inadvertent overcontribution.

Norman1 said
I think so as well. The procedure with form T3012A or T746 is more to undo a contribution than to withdraw a contribution.

I noticed that the deduction from T3012A or T746 is special as it is entered on line 232 (Other deductions) of the tax return. That is not the same as a regular RRSP contribution deduction which is entered on line 208 (RRSP deduction).  

We're getting into word semantics here. In this case, "undo" and "withdrawal" are interchangeable because you've still benefited from the tax-sheltered growth from the registered plan, you've just not taken the income tax refund on the contribution. From the reading I was going, it sounds like I was right originally: the T756 will allow you to receive an offsetting credit for the T4RSP income on the withdrawal of contribution(s) not previously deducted. However, you can use a T3012A to apply to the CRA for permission to instruct your FI not to withhold taxes at source. Even if that request is denied or you don't submit that because you don't care about that, it sounds like you still need to attach a T3012A for permission, essentially, to use a T756 that would claim the offsetting tax credit.

It's all dependent on the CRA approving one's request, which further fuels my prior arguments of a people-heavy government bureaucracy full of bureaucratic red tape, inefficiencies, and subjective rulings. That said, due to the vagueness of their guidelines, I would imagine it would be difficult to prove legitimacy in their denials to the Tax Court unless, say, the person was over their $2000 over-contribution threshold all or most of the time (in other words, something egregious like that).

It's leaving a lot to chance, so I won't go that route. Still, I can see why it's there because since you can either declare your RRSP contribution (and take the deduction) in either of the current tax year or the preceding one, in one of those years, you would simply be answering "no" to "did you make an RRSP contribution?" (unless you're allowed to leave the contribution amount blank). It could be easy to forget to take it the next year. Unless I was doing it every year, in which case, it may be denied or I'd be told to take the deduction (I imagine there's an area on a special form that allows you to take the deduction later on if you miss it too) from my available contribution room. Likely, the best chance to getting it approved is to make a large lump-sum contribution in your late 50s or early 60s, "miss" taking the deduction and then 10 years later, applying for that special approval, which would likely be approved. Still, you've only benefited from 10 years tax-free growth, not as good as 30. 🙁

I repeat my call: eliminate RRSPs and combine them and TFSAs into a single Investment Retirement Account ("IRA") like TFSAs that allows tax-free growth and withdrawals, but provides no tax deferral. Make its limit a fixed $20,000, per person, per year. No percentage based on income, subject to annually-increased cap.

Such a move would provide the government with an instant $50-60 billion annual "injection" of tax revenue from the eliminated large tax expenditure, though it'd be uncalculated how much lost potential revenue they'd sacrificed on those IRA balances long-term.

Cheers,
Doug

Norman1, if you're not claiming all that's available to you line 15 will be zero or the lesser amount you're claiming for that year. The wording of Schedule 7 is correct as is.

You are correct, the Tax Court will deny the appeal. Luckily for us most TC judges, at least as of today, are still assiduous re the specific meaning of words, within context of course. When you read legislation a lot you understand that wording was intentionally selected as well as omitted, though there are always some errors of course. Note, though, that CRA webpage wording provided by civil servants will not carry the day, it will depend on the wording of the legislation enacted by our democratically elected representatives, and I admit I haven't reviewed that in our discussion here.