2015 RRSP Thread

[Ozy_Flame]

Originally Posted by Sylvanfan

^^^
I end up owing about $300 a year every year, with charity donations and children's fitness art credits plus RRSP. My RRSP contributions are done as payroll deductions. Still payroll miscalculated this every year. In the end it's better to owe than be owed as you get the government's money interest free for 4 plus months.

Not sure what this means - can you go into further detail?

[Calgary14]

Originally Posted by Ozy_Flame

Not sure what this means - can you go into further detail?

What he means is that when someone receives a refund they are essentially getting money back that was originally theirs. For example if too much taxes are taken off each paycheque, you'll get a tax refund in the spring for money that should have been in your pocket. Basically an interest free loan to CRA

When someone owes taxes that means no extra money has been given to CRA

[Slava]

Originally Posted by Ozy_Flame

Is it normal to owe every year? I make just under six digits and I'm contributing 10% of my paycheque to an RRSP every paycheque. Part of my income is variable and I earn it twice a year, and pay full tax on it every paycheque. Why the hell does it seem like I owe every year? This year is no different. Is this normal?

Originally Posted by Sylvanfan

^^^
I end up owing about $300 a year every year, with charity donations and children's fitness art credits plus RRSP. My RRSP contributions are done as payroll deductions. Still payroll miscalculated this every year. In the end it's better to owe than be owed as you get the government's money interest free for 4 plus months.

Just out of pure curiosity do you guys work for companies that have their payroll completed by ADP? You don't have to say if you'd rather not for some reason, but I assure you I'm just curious.

[Ozy_Flame]

I see, thanks for the explanation.

I guess my bigger greivance as a whole is, if I pay taxes all year, every paycheque, why do I still owe more at the end of the year? Just an odd thing to do, since tax deductions is essentially a transaction between my company and the government with my money.

[Sylvanfan]

Originally Posted by Slava

Just out of pure curiosity do you guys work for companies that have their payroll completed by ADP? You don't have to say if you'd rather not for some reason, but I assure you I'm just curious.

Company I work has our own staff that do payroll.

[Ozy_Flame]

We don't use ADP, although I have been with companies that did in the past.

[calgarywinning]

Maybe someone can answer this question. Can your company not submit taxes on a bonus amount if they know what RRSP contribution amount you are going to make?

What does the CRA say on this. I believe if the company makes the RRSP contribution directly, non-arms length, that this is legal. Wonder if anyone has knowledge of this. Rather than submit the tax to wait 6 months to get it back.

[Calgary14]

Originally Posted by calgarywinning

Maybe someone can answer this question. Can your company not submit taxes on a bonus amount if they know what RRSP contribution amount you are going to make?

What does the CRA say on this. I believe if the company makes the RRSP contribution directly, non-arms length, that this is legal. Wonder if anyone has knowledge of this. Rather than submit the tax to wait 6 months to get it back.

You need to fill out a form T1213 which is a request to have less taxes deducted from your pay. In general an employer will want to deduct enough so that you aren't owing much (if at all) when you file. A basic payroll deduction calculator can help with this. Without this form the employer will deduct taxes on a bonus amount.

Here's a link to a TD1 form which is used to calculate your tax deductions and takes into account different things like tuition, caregiver etc.

http://www.cra-arc.gc.ca/E/pbg/tf/td1/README.html

[lazy_programmer]

Originally Posted by calgarywinning

Maybe someone can answer this question. Can your company not submit taxes on a bonus amount if they know what RRSP contribution amount you are going to make?

What does the CRA say on this. I believe if the company makes the RRSP contribution directly, non-arms length, that this is legal. Wonder if anyone has knowledge of this. Rather than submit the tax to wait 6 months to get it back.

we have this option. Depending on your financial institution, your employer may need to send a letter along with the contribution explaining they are contributing to your RRSP on your behalf, as it'll be like a direct deposit into the RRSP account.

[darklord700]

Originally Posted by calgarywinning

Maybe someone can answer this question. Can your company not submit taxes on a bonus amount if they know what RRSP contribution amount you are going to make?

What does the CRA say on this. I believe if the company makes the RRSP contribution directly, non-arms length, that this is legal. Wonder if anyone has knowledge of this. Rather than submit the tax to wait 6 months to get it back.

My previous company had done this. The bonus cheque will be issued to your financial institution, say, BMO Investorline, and not to you. They didn't withold any taxes on the bonus payment. You can also choose to take it as bonus minus the WHT of course.

[I_H8_Crawford]

Originally Posted by Calgary14

Not directly related to the RRSP but a new study came out today saying that doubling the TFSA limit would only benefit the wealthy.

http://www.cbc.ca/news/politics/doub...gues-1.2967796

The study estimates if someone put the annual contribution limit in every year they could earn up to $8M over their lifetime (assuming the contribution limit gets doubled).

Garth Turner has a good blog about the TFSA issue, and I tend to agree with him on his position:

http://www.greaterfool.ca/2015/02/24/tax-this-2/

[Slava]

Originally Posted by I_H8_Crawford

Garth Turner has a good blog about the TFSA issue, and I tend to agree with him on his position:

http://www.greaterfool.ca/2015/02/24/tax-this-2/

I also tend to agree with that position.

[darklord700]

Originally Posted by I_H8_Crawford

Garth Turner has a good blog about the TFSA issue, and I tend to agree with him on his position:

http://www.greaterfool.ca/2015/02/24/tax-this-2/

Don't agree with this position.

To build a $2.6M portfolio like the article suggested, your income has already been taxed once either as salary or business income. Only the growth in the portfolio is being taxed at 50%.

So how many times should our income be taxed? Is it a crime for people that save and invest smartly in this country?

[I_H8_Crawford]

Originally Posted by darklord700

Don't agree with this position.

To build a $2.6M portfolio like the article suggested, your income has already been taxed once either as salary or business income. Only the growth in the portfolio is being taxed at 50%.

So how many times should our income be taxed? Is it a crime for people that save and invest smartly in this country?

I think his point is more of the people who take that after-tax employment income, and use it to invest in TFSAs with assets like ETFs are doing it smart, and will in the end, have more money and avoid taxes vs. the people who don't contribute to a TFSA when they have the means to do so (instead spending it on large mortgages, or toys, etc.)

Those are the people that are going to get screwed going forward, and those are the people (generalization upcoming) who don't like the idea of doubling the contribution limits of the TFSA.

[Slava]

Originally Posted by darklord700

Don't agree with this position.

To build a $2.6M portfolio like the article suggested, your income has already been taxed once either as salary or business income. Only the growth in the portfolio is being taxed at 50%.

So how many times should our income be taxed? Is it a crime for people that save and invest smartly in this country?

So what you're wanting is a way to invest and have the gains not taxable at all because the money you invested was already taxed once?

If that's what you're after, you're in luck. Its the TFSA.

[darklord700]

Originally Posted by Slava

So what you're wanting is a way to invest and have the gains not taxable at all because the money you invested was already taxed once?

The article compares a dividend income of say $40K to a masseur earning $40K; and that the masseur is being taxed higher becasue dividend income is sheltered partly by DTC. That's not fair as the company has already been taxed once before paying dividends and that's why we have the DTC mechanism.

As far as $40K capital gains vs $40K salary, the government wanted to incentivize investment and so capital gains is 50% taxable or gave you the life time capital gain exemption before. Also the use of capital losses are very restrictive so it's not fair to compare the more beneficial capital gains treatment to salary tax as well.

[Slava]

Originally Posted by darklord700

The article compares a dividend income of say $40K to a masseur earning $40K; and that the masseur is being taxed higher becasue dividend income is sheltered partly by DTC. That's not fair as the company has already been taxed once before paying dividends and that's why we have the DTC mechanism.

As far as $40K capital gains vs $40K salary, the government wanted to incentivize investment and so capital gains is 50% taxable or gave you the life time capital gain exemption before. Also the use of capital losses are very restrictive so it's not fair to compare the more beneficial capital gains treatment to salary tax as well.

Right and that all makes sense to me. I think that it would make sense to Turner as well? I guess you lost me somewhere then because I'm not sure what your point is that you disagree with?

I know earlier in the thread you felt that the TFSA isn't quite as good as people think because you don't get the DTC, but I would take the tax free dividends over the DTC anyday. Maybe that's where I lost what you're getting at?

[darklord700]

Originally Posted by Slava

Right and that all makes sense to me. I think that it would make sense to Turner as well? I guess you lost me somewhere then because I'm not sure what your point is that you disagree with?

My point is Turner can't compare the higher tax a masseur pays vs the lower tax an investor pays on dividend/capital gain and draw the conclusion the masseur is being taxed unfairly.

[V]

Originally Posted by Ozy_Flame

Is it normal to owe every year? I make just under six digits and I'm contributing 10% of my paycheque to an RRSP every paycheque. Part of my income is variable and I earn it twice a year, and pay full tax on it every paycheque. Why the hell does it seem like I owe every year? This year is no different. Is this normal?

Give a little bit of money to charity you tightwad.

[IliketoPuck]

Originally Posted by V

Give a little bit of money to charity you tightwad.

Or get a better accountant.