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Pre-Tax RRSP contributions

Forum|Forum|2 years ago
March 6, 2024
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Hi, I had received a bonus at work mid-2023 and I had asked my employer to direct that bonus directly to my RRSP (ie: the contribution is pre-tax since they did not need to take any withholdings on it in this case).

Q#1 - Should I still be receiving some sort of tax slip for this contribution to enter onto my tax return? Or do they not provide one since the contribution was made pre-tax?

I also made another lumpsum contribution for another bonus early this year in Jan 2024.

Q#2 - Should I be getting a tax slip for this one too for my 2023 taxes since it was done in first 60 days?

Thanks

Best answer by Jity22

This issue has caused a lot of confusion before i explain i will define some important tax return terms and box Numbers on your T4;

Group RRSP = Employee contributed RRSP (pre tax) + Employer Matched RRSP (pre tax)

Box 14: Total pre tax Income (Income before tax = Sum of pre tax income on all your pay slip for the year + Bonus pay + employer matched RRSP). Note that employer matched RRSP is considered as an income to an employee.

Taxable Income: This is the amount of income subject to tax, after deductions (such as RRSP). Note that there is no line number on T4 slip for taxable income, the taxable income can only be determined at tax return stage.

Pay slip taxable income: Pre tax income on your pay slip - Employee contributed RRSP pre tax

Pay slip paid tax= Tax paid on Pay slip taxable income

Box 22: Income tax paid on all pay slip taxable income for the year (Sum of pre tax income on all your pay slip for the year - sum of Employee contributed RRSP for the year)

Box 22: Income tax paid = sum of Pay slip paid tax for the year

Tax deductions: are amounts you subtract from your total income, making your taxable income lower. This means you’d be charged taxes on a smaller amount of income (https://turbotax.intuit.ca/tips/popular-canadian-tax-benefits-deductions-and-credits-in-2023-14180). Note that RRSP are tax deductible

When you upload a T4 to turbo tax it will read box 14 and box 22, if you have contributed to group RRSP it will appear that you have underpaid your taxes as turbo tax does not have information on your Pay slip taxable income, therefore you have to input your group RRSP contribution (Employee contributed RRSP + Employer Matched RRSP ) as a deduction on turbo tax. Remember that your employer have included Employer Matched RRSP as an income on box 14. You can always try a dry run or simulation by uploading only T4 without any deduction or credit and you will see that it appears that you have heavily underpaid your taxes. (you can use this turbo tax quick calculator https://turbotax.intuit.ca/tax-resources/canada-rrsp-calculator.jsp)

TurboTaxSusan

Yes, you should receive an RRSP contribution receipt for both contributions.

B

BlueMatiaAuthor

Thank you Susan,

And would be that tax slip number?

TurboTaxSusan

It's just called a RRSP contribution receipt.

J

Jity22Answer

This issue has caused a lot of confusion before i explain i will define some important tax return terms and box Numbers on your T4;

Group RRSP = Employee contributed RRSP (pre tax) + Employer Matched RRSP (pre tax)

Box 14: Total pre tax Income (Income before tax = Sum of pre tax income on all your pay slip for the year + Bonus pay + employer matched RRSP). Note that employer matched RRSP is considered as an income to an employee.

Taxable Income: This is the amount of income subject to tax, after deductions (such as RRSP). Note that there is no line number on T4 slip for taxable income, the taxable income can only be determined at tax return stage.

Pay slip taxable income: Pre tax income on your pay slip - Employee contributed RRSP pre tax

Pay slip paid tax= Tax paid on Pay slip taxable income

Box 22: Income tax paid on all pay slip taxable income for the year (Sum of pre tax income on all your pay slip for the year - sum of Employee contributed RRSP for the year)

Box 22: Income tax paid = sum of Pay slip paid tax for the year

Tax deductions: are amounts you subtract from your total income, making your taxable income lower. This means you’d be charged taxes on a smaller amount of income (https://turbotax.intuit.ca/tips/popular-canadian-tax-benefits-deductions-and-credits-in-2023-14180). Note that RRSP are tax deductible

When you upload a T4 to turbo tax it will read box 14 and box 22, if you have contributed to group RRSP it will appear that you have underpaid your taxes as turbo tax does not have information on your Pay slip taxable income, therefore you have to input your group RRSP contribution (Employee contributed RRSP + Employer Matched RRSP ) as a deduction on turbo tax. Remember that your employer have included Employer Matched RRSP as an income on box 14. You can always try a dry run or simulation by uploading only T4 without any deduction or credit and you will see that it appears that you have heavily underpaid your taxes. (you can use this turbo tax quick calculator https://turbotax.intuit.ca/tax-resources/canada-rrsp-calculator.jsp)

X

xyz1985

Clarity for one point:

On box 14, would this show gross pay be factoring in Employee RRSP deductions already?

For simple example:

A) Bi weekly gross amount 6,000$ x 26= 156,000

RRSP BI weekly Employee deductions...1000$= 26000$ FOR WHOLE YEAR

Would box 14, forgetting Employer's RRSP contributions for now, be

156,000K

or 130,000?( 156K- 26K)

T

TurboImpotVeronique

@xyz1985 The previous answer from @Jity22 is really complete and answers your question exactly. As a complement, we suggest you consult this link from CRA which gives more details about box 14 and what your employer can include in this box.

Thank you for choosing TurboTax.