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[HELP] Understanding T4 with Yearly Bonus put into RRSP

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  • May 11th, 2020 8:16 pm
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[OP]
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Jan 21, 2002
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[HELP] Understanding T4 with Yearly Bonus put into RRSP

Hello, seeking the groups' advice on the following scenario, with regards to T4, and a Bonus Amount included on the T4 which was put directly to RRSP through my employer - this is my first time going through this scenario as in previous years I would have the bonus paid out directly.

Let's say my 2019 Gross Income was: $80,000, with a $5,000 bonus I opted to direct to the Company RRSP program for 2019. When the $5,000 was issued to the RRSP program, only CPP and EI was taken out (no Federal Tax). However this $5,000 was added into my gross income on my T4 (Box 14) for a total of $85,000. After running the numbers through my favorite tax program, it appears because the $5,000 is counted as gross income (and no Federal tax was taken out) I now owe taxes to the government.

Questions -
1. Does this seem "right"? As the $5,000 was put directly into my RRSP - and not paid to me - why is it being included as part of my gross income?
2. Should this amount be removed from the gross income from Box 14 on the T4 leaving only $80,000 as my gross income?
3. It seems like I'll be taxed twice on this amount - now, and when I goto withdraw when I'm over 65, which seems counter intuitive.
4. If the example is indeed "correct" - what is the benefit of allocating my bonus to the Employee RRSP if I will be taxed on the contribution?

Perhaps I'm missing something, appreciate any insight you may have.
8 replies
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Dec 24, 2007
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1. That $5,000 bonus is still part of your income but you can claim a RRSP deduction for the contribution so it nets out to Nil to your taxable income. You probably didn't do that in your tax program.
2. No, see #1
3. You're not taxed twice as you don't pay tax when it goes into your RRSP but you pay tax when it comes out. There is no free lunch. The benefit is that it grows tax-free while in the RRSP.
4. Depends whether your Employee RRSP plan provides for employer matching your contributions
[OP]
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Jan 21, 2002
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WetCoastGuy wrote: 1. That $5,000 bonus is still part of your income but you can claim a RRSP deduction for the contribution so it nets out to Nil to your taxable income. You probably didn't do that in your tax program.
2. No, see #1
3. You're not taxed twice as you don't pay tax when it goes into your RRSP but you pay tax when it comes out. There is no free lunch. The benefit is that it grows tax-free while in the RRSP.
4. Depends whether your Employee RRSP plan provides for employer matching your contributions
Thank you.

Re: 1 - you're right, I didn't claim the $5,000 as a RRSP contribution for 2019 (and owed a silly amount). Once I claimed it, taxes owing is close to $0. Lesson: always claim it!
Re: 4 - there is no matching from the employer on RRSP - but I take it that me contributing 5k pre-tax is better than me getting the bonus paid out, and scrambling to find a few $k more to put back $5k.
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Jan 19, 2017
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the one wrote: Thank you.

Re: 1 - you're right, I didn't claim the $5,000 as a RRSP contribution for 2019 (and owed a silly amount). Once I claimed it, taxes owing is close to $0. Lesson: always claim it!
Re: 4 - there is no matching from the employer on RRSP - but I take it that me contributing 5k pre-tax is better than me getting the bonus paid out, and scrambling to find a few $k more to put back $5k.
You should have received a RRSP contribution slip. If you didn't, then you can't claim it.
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May 16, 2017
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ml88888888 wrote: You should have received a RRSP contribution slip. If you didn't, then you can't claim it.
Presuming that this bonus was deposited to the OP's RRSP account within the first 60-days of 2020, then the deduction can be claimed on the 2019 income tax return. Yes, a slip should have been received but it may be available on-line only depending on the employer's RRSP plan. As long as the OP has evidence of deposit into an RRSP account within those 1st 60 days, the deduction can be claimed - the lack of a slip in hand isn't a deal breaker - claim it.
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robsaw wrote: Presuming that this bonus was deposited to the OP's RRSP account within the first 60-days of 2020, then the deduction can be claimed on the 2019 income tax return. Yes, a slip should have been received but it may be available on-line only depending on the employer's RRSP plan. As long as the OP has evidence of deposit into an RRSP account within those 1st 60 days, the deduction can be claimed - the lack of a slip in hand isn't a deal breaker - claim it.

correct. I received one in mail and one was available online. Also strange the CRA account dont have one slip yet.
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Aug 20, 2015
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the one wrote: Re: 4 - there is no matching from the employer on RRSP - but I take it that me contributing 5k pre-tax is better than me getting the bonus paid out, and scrambling to find a few $k more to put back $5k.
For me it would depend on what type of options the employer RRSP has. Previous companies I've worked for only had designated mutual funds I could buy. I prefer to go ETF's so I only contributed what would be matched. I used QT for the rest of my RRSP.

In regards to getting the RRSP paid out, if you eventually put that $5k into a self directed RRSP after tax season the amount of money you've paid in taxes will be a wash in comparison to if you directly submitted to your employer RRSP. Even better, if you know how much you will be contributing to your RRSP each year you can just fill out a T1213 form and you won't need to wait for tax season for your return.

https://www.canada.ca/en/revenue-agency ... t1213.html
[OP]
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Jan 21, 2002
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Thank you all for the immense help and clarity. The contribution was applied to the Employee RRSP in March of 2019, so the RRSP contribution applies to the 2019 year. A statement from Sun Life was available online (not mailed). I added the $5,000 2019 RRSP contribution in Studio Tax, and all is well now in terms of taxes owing.
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Jan 19, 2017
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robsaw wrote: Presuming that this bonus was deposited to the OP's RRSP account within the first 60-days of 2020, then the deduction can be claimed on the 2019 income tax return. Yes, a slip should have been received but it may be available on-line only depending on the employer's RRSP plan. As long as the OP has evidence of deposit into an RRSP account within those 1st 60 days, the deduction can be claimed - the lack of a slip in hand isn't a deal breaker - claim it.
When I said 'received', that includes the paper copy or electronic copy. Most people would think my statement means the employer issued the slip, it doesn't have to mean paper copy only.

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