QUESTION:
Hello,
I (spouse and child also) moved to Vancouver in 2004 as a Permanent
Resident. I was employed the entire year and contributed as much as I could
to my RRSP. Hence, when I filed my taxes in April 2005, I deducted the RRSP
deductions from my T1 return for 2004 (even though I never received a Notice
of Assessment). Mind you, this is my first tax return. I added up the
contributions for the RRSP receipts for the following periods:
1. JAN-MARCH 2004
2. APRIL-DECEMBER 2004
3. JAN-MARCH 2005
But CRA sent me the notice of assessment indicating that my contribution
limit for 2004 is 0 (I never had income in Canada for 2003 since I was not a
Permanent Resident) and hence I could not take the deduction. Could you
please let me know if CRA's assessment is correct? Do they not expect first
year PRs to contribute to an RRSP? With the RRSP deduction excluded from my
return, I am now faced with a tax bill. Thanks a bunch.
======================================
david ingram replies:
You should stand whoever sold you the RRSP's against a brick wall and shoot
them. You could not be expected to know that you can NOT deduct any RRSP
contributions in a first year in Canada. The biggest problem is that if you
put more than $2,000 over your allowed "room" there is a 1% per month
penalty for the excess.
Since 1991, Canada has used the PREVIOUS year's earnings to calculate the
amount you can contribute to an RRSP THIS year.
Do Not make any more contributions now unless your total is no more than the
room which shows on your 2004 Notice of Assessment.
If you are in Vancouver, call Fred Snyder of Dundee Wealth Management at
(604) 731-8900 and get him to give you a written financial plan which will
deal with your RRSP, How to make a Canadian Mortgage deductible, and a
myriad of other information that a new Canadian needs to know.
PS - don't shoot the person who sold you the RRSP but do NOT deal with them
anymore.
===================================
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