Personal Finance

Tax time! I'm a public accountant, so ask me, I'll try to respond frequently

  • Last Updated:
  • Dec 13th, 2017 8:37 pm
Jr. Member
Jun 23, 2010
163 posts
50 upvotes
North York
I arranged to "Request to Reduce Tax Deductions at Source" (T1213, https://www.canada.ca/en/revenue-agency ... t1213.html) with my employer, but was unaware until this month that my bonus for this year will now be paid in January of the next year. Last year they paid in December of the same year, so I wrongfully assumed it will be the same for this year.

My RRSP limit will be lower than I expect for 2018, so this will result in over contributing RRSP during 2018. What are my options?

Thanks!
Deal Fanatic
User avatar
Nov 19, 2004
7220 posts
993 upvotes
Cambridge, ON
nonfatalexec wrote:
Dec 6th, 2017 5:05 pm
I arranged to "Request to Reduce Tax Deductions at Source" (T1213, https://www.canada.ca/en/revenue-agency ... t1213.html) with my employer, but was unaware until this month that my bonus for this year will now be paid in January of the next year. Last year they paid in December of the same year, so I wrongfully assumed it will be the same for this year.

My RRSP limit will be lower than I expect for 2018, so this will result in over contributing RRSP during 2018. What are my options?

Thanks!
What are you asking? How to avoid over contributing in 2018? The answer seems simple enough. Is there some reason you can't control how much you are going to contribute in the future?
Jr. Member
Jun 23, 2010
163 posts
50 upvotes
North York
don242 wrote:
Dec 6th, 2017 5:32 pm
What are you asking? How to avoid over contributing in 2018? The answer seems simple enough. Is there some reason you can't control how much you are going to contribute in the future?
I understood my problem incorrectly. I'll be underpayment taxes deducted at source as a result of overstating my RRSP contribution. I'll obviously adjust my RRSP after learning that my bonus for this year is paid in January of next year. What are my options?
Deal Fanatic
User avatar
Nov 19, 2004
7220 posts
993 upvotes
Cambridge, ON
nonfatalexec wrote:
Dec 6th, 2017 6:48 pm
I understood my problem incorrectly. I'll be underpayment taxes deducted at source as a result of overstating my RRSP contribution. I'll obviously adjust my RRSP after learning that my bonus for this year is paid in January of next year. What are my options?
I still don't really follow. You completed a TD1 for 2017 under the assumption you would contribute x amount to your rrsp for 2017, thereby reducing your taxes on your paycheque. So if you contributed what you stated you would then there should be no issue. I don't really see what the bonus has to do with it. Did you contribute to your rrsp as much as you said you would in the TD1?

Or are you saying because you didn't get your bonus, you won't be contributing as much as you were planning? Even so, if you get the bonus in January, then just contribute in January for 2017.
Jr. Member
Jun 23, 2010
163 posts
50 upvotes
North York
don242 wrote:
Dec 6th, 2017 7:08 pm
I still don't really follow. You completed a TD1 for 2017 under the assumption you would contribute x amount to your rrsp for 2017, thereby reducing your taxes on your paycheque. So if you contributed what you stated you would then there should be no issue. I don't really see what the bonus has to do with it. Did you contribute to your rrsp as much as you said you would in the TD1?

Or are you saying because you didn't get your bonus, you won't be contributing as much as you were planning? Even so, if you get the bonus in January, then just contribute in January for 2017.
I calculated my RRSP room for 2018 based on getting my 2017 bonus in the same year. I submitted the reduction of tax at source for 2018 assuming contributing my maximum RRSP based on the same assumption. My 2018 RRSP room is actually less, so I have to reduce my RRSP contribution during 2018. This will result in having less tax deducted from my pay.
Newbie
Mar 1, 2016
45 posts
8 upvotes
Toronto
Question: My common-law relationship ended this year - what do I put on my tax forms next year? Separated or single?
Deal Addict
Aug 30, 2011
2659 posts
597 upvotes
Ottawa
BIGSJK wrote:
Dec 7th, 2017 12:56 pm
Question: My common-law relationship ended this year - what do I put on my tax forms next year? Separated or single?
Separated. https://www.canada.ca/en/revenue-agency ... tatus.html

Edit: why no one should use H&R Block ... they give the wrong answer, not that there's a difference in the end, but the CRA is quite clear about the new status being separated, not single.
Member
May 28, 2007
479 posts
60 upvotes
If someone has a $2,000 allowable over contribution in their RRSP and is no longer working and they still have an allowable contribution limit above $2,000, can they wihdraw the $2,000 from their RRSP and take a $2,000 RRSP deduction in the same year to offset the withdraw. So in effect, taking the $2,000 out tax free, except for the fee the bank charges for making the withdraw. I know you can fill out a form to ask the bank to remove the overcontributed amount, but this seems more of a hassle compared to what I was thinking of doing. But whichever way you choose, the bank will still end up charging you a fee for doing it.

And to withdraw as much of your RRSP as possible over a number of years before you turn 65 or have to convert it to a RRIF at 71, so that you can try to have as little earned income as possible to declare, so that you may qualify for the GIS, how should you go about doing that to save as much of your money as possible? If you withdraw straight out of your RRSP yearly, the bank charges a $50 fee each time. Can you open a RRIF, transfer $6,000 from your RRSP into the RRIF, and right away withdraw the $6,000 from the RRIF in the same year? Repeating this yearly by transferring and withdrawing. This is assuming the bank doesn't charge a fee for RRIF withdrawals. That way, you save the $50 per withdraw. Doing this for 10 years till you turn 65, the $60,000 withdrawn will have just cost you $500 in withdrawal fees if it was taken from the RRSP directly or cost you nothing if the RRIF procedure works. Then, you'll still have an equal amount left in your RRSP, which is better than the whole by doing nothing, and withdraw that slowly from a RRIF when you turn 71. This way, your income will be lower and you might qualify for the GIS. Does that sound like a feasible or smart plan?
Sr. Member
User avatar
Apr 23, 2009
825 posts
125 upvotes
Question for TAX Accountants / CPAs:

I have a few questions on interest deductibility.

Let's assume:

Mr. X obtains a $200,000, 5 year fixed (or variable) mortgage on his house and invests the entire amount in Canadian dividend paying stocks.

Scenario 1

After 5 years, lets assume the stocks are now worth $400,000. Can Mr. X sell half of his stocks worth $200,000 and still be able to deduct 100% interest expense on his tax return? The outstanding loan is still $200,000, the remaining market value of stocks is now $200,000 (since he sold the other half). Can he allocate the entire $200,000 in outstanding loans to the assets that are still remaining? The argument in this case for interest deductibility is that the original loan is fully intact (unchanged) and the original investment has appreciated significantly. By selling half of the investments, can Mr. X argue that he is only removing the capital gains and dividends; and that the original investment as well as the loan is still fully intact?

Scenario 2

Assume that Mr. X refinances the original mortgage of $200,000 with a different bank. The borrowed money is still invested in the brokerage account generating dividend income. Will the interest on the refinanced loan be still deductible? The risk in my view is that CRA may argue the 'original use' of loan no longer exist and that the refinancing eliminated the original loan. CRA may argue that the purpose of the refinanced amount was to pay off the original loan and not to generate income. What is your take on this?

Scenario 3

Assume that Mr. X doesn't refinance but merely transfers the original mortgage to a new bank or renews with the existing bank. What will be the impact on interest deductibility? I know that when switching the banks, the new bank will purchase the mortgage from the old bank by paying them off. So in that sense, the mortgage with the old bank is extinguished and therefore the mortgage with the new bank was used to pay-off the original loan. The original loan is now gone.

Scenario 4

Assume Mr. X annually withdraws the dividend income (for personal use) from the brokerage account but does not touch the original investment. Is 100% of the interest expense still deductible?
Newbie
May 7, 2015
7 posts
2 upvotes
Vancouver, BC
I am thinking if it's possible to delay a capital gain as follows:

I own bitcoin. I sell some bitcoins on the largest Canadian exchange, known as QuadrigaCX. My "Canadian dollar" balance on QuadrigaCX shows the sale proceeds. I can now either withdraw the funds to my retail Canadian bank account right away (December 2017), or keep the funds on the QuadrigaCX website for some time and withdraw them after January 1st 2018. One would normally assume that the capital gain would have occurred at the time of converting bitcoin into CAD. However, QuadrigaCX terms of service state:

"All account fundings are considered to be purchases of QuadrigaCX Bucks. These are units that are used for the purposes of purchasing Bitcoin or other cryptocurrencies. QuadrigaCX Bucks are NOT Canadian Dollars. Any notation of $, CAD, or USD refers to an equivalent unit in QuadrigaCX Bucks, which exist for the sole purpose of buying and selling Bitcoin and other cryptocurrencies.
QuadrigaCX is NOT a financial institution, bank, credit union, trust, or deposit business. We DO NOT take Deposits. We exist solely for the purposes of buying and selling cryptocurrencies."

Given the above, if I wait to withdraw my CAD-denominated funds (so called QuadrigaCx Bucks) from their website into my Canadian bank account after January 1, 2018 - would that mean that the capital gain was incurred in January at the time of the conversion from Quadriga Bucks into proper canadian dollars, rather than in December?
Sr. Member
User avatar
Oct 24, 2011
623 posts
171 upvotes
Timmins
RCML27 wrote:
Dec 7th, 2017 1:51 pm

snip

Doing this for 10 years till you turn 65, the $60,000 withdrawn will have just cost you $500 in withdrawal fees if it was taken from the RRSP directly or cost you nothing if the RRIF procedure works. Then, you'll still have an equal amount left in your RRSP, which is better than the whole by doing nothing, and withdraw that slowly from a RRIF when you turn 71. This way, your income will be lower and you might qualify for the GIS. Does that sound like a feasible or smart plan?
The income limit for a single person to obtain 4 cents of GIS is $17,736 (right now). https://www.canada.ca/en/services/benef ... ments.html

(edited to make the post shorter)
Newbie
Feb 9, 2016
38 posts
1 upvote
I always wondered about this. What is the status of the surviving partner if a common-law partner dies? Single or widowed?
Deal Addict
Jun 12, 2015
1808 posts
489 upvotes
Ontario
fbjin01 wrote:
Dec 9th, 2017 8:38 pm
I always wondered about this. What is the status of the surviving partner if a common-law partner dies? Single or widowed?
Status shouldn't have an impact on taxes as single or widowed are essentially the same. I would guess widowed but single wouldn't raise concerns either.
Newbie
Oct 23, 2006
51 posts
Thanks for all.

Will contributing to RRSP lower a persons income so that the the lower income will be used for CCTB and for Quebec child support and child care expenses for those of us living in Quebec?

Example: couple earning 100k and they contribute 18k to RRSP. So family income is now 82k for CCTB, Quebec child support, and Quebec child care expenses?

Thanks

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