Personal Finance

Is bonus payment used to increase the rrsp room for next year?

  • Last Updated:
  • Dec 16th, 2019 7:23 am
[OP]
Banned
Nov 1, 2013
304 posts
42 upvotes

Is bonus payment used to increase the rrsp room for next year?

Lets say I make $75000 in a year and get a bonus of $15000 before end of year. My total income is 90000.
Will my rrsp room be 18% of 75000 OR 90000?
Can someone with expert knowledge please clarify?
11 replies
[OP]
Banned
Nov 1, 2013
304 posts
42 upvotes
ml88888888 wrote: Unless it is not reported on your T4.
is it possible for the employer to label bonus as some other income but not as employment income?
Deal Addict
Jan 1, 2017
1325 posts
1168 upvotes
Louking wrote: is it possible for the employer to label bonus as some other income but not as employment income?
No, they won’t do it. Why do you ask? Trying to save on taxes? Won’t happen since they have withhold taxes at source.
Member
Feb 9, 2018
415 posts
298 upvotes
ml88888888 wrote: Unless it is not reported on your T4.
But I guess any legitimate business will report a bonus amount as big as $15000 on T4.
Member
May 28, 2012
396 posts
341 upvotes
ONT
Louking wrote: Lets say I make $75000 in a year and get a bonus of $15000 before end of year. My total income is 90000.
Will my rrsp room be 18% of 75000 OR 90000?
Can someone with expert knowledge please clarify?
Not sure if applicable in your case but 25 years ago my employer had a Defined Benefit retirement plan where they contributed 1.5% of the income to the DB. The pension was based on the 3 best/highest years income. We had a bonus plan as well that could be taken either mid December OR mid January. One year I took the bonus both January AND December and then neither the next year. This was repeated for several years, obviously paying more tax but thinking long term. In your case, if applicable, your pension would be based on “best” years incomes of $105K, not $90K.
I retired 20 years ago and the additional pension total has been substantial. If this scenario could work for you, maybe ask the HR Dept. if you could delay the bonus until January……………
[OP]
Banned
Nov 1, 2013
304 posts
42 upvotes
ProductGuy wrote: No, they won’t do it. Why do you ask? Trying to save on taxes? Won’t happen since they have withhold taxes at source.
because if it is labeled as something else you will still pay tax on it but it wont count towards rrsp limit.
[OP]
Banned
Nov 1, 2013
304 posts
42 upvotes
mrct1944 wrote: Not sure if applicable in your case but 25 years ago my employer had a Defined Benefit retirement plan where they contributed 1.5% of the income to the DB. The pension was based on the 3 best/highest years income. We had a bonus plan as well that could be taken either mid December OR mid January. One year I took the bonus both January AND December and then neither the next year. This was repeated for several years, obviously paying more tax but thinking long term. In your case, if applicable, your pension would be based on “best” years incomes of $105K, not $90K.
I retired 20 years ago and the additional pension total has been substantial. If this scenario could work for you, maybe ask the HR Dept. if you could delay the bonus until January……………
This is a good one, thanks for posting.
Deal Addict
Jan 1, 2017
1325 posts
1168 upvotes
Louking wrote: because if it is labeled as something else you will still pay tax on it but it wont count towards rrsp limit.
Don’t you want it to count towards an increased rrsp room? Bonus does not eat up your rrsp limit, it actually creates more. Only if you put the bonus in your rrsp then it eats up your rrsp room regardless of what it is coded on your pay stub. It’s like a regular rrsp contribution.
Deal Fanatic
Dec 16, 2005
5464 posts
3534 upvotes
sunbat wrote: But I guess any legitimate business will report a bonus amount as big as $15000 on T4.
I had a $50k bonus that was not recorded on my T4. The payroll person screwed up. So it is possible. I asked to have the entire $50k be put into an RRSP

I reported it as other income and got an inquiry from CRA almost a year later as to the source of income.

Had to get my employer to revise and reissue T4. Then I submitted the CRA questionnaire and revised T4. CRA revised my NOA.

I suppose if I did not report the $50k I would have gotten away with about $25k of tax liability.

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