Please note: I have read many posts regarding RRSP's but could not find an answer to my specific situation.
We offer a group RRSP top up on every paycheque - to illustrate: the stub would read 40 hours at the regular rate and 40 hours at the RRSP rate (separate income fields).
In the deduction column, we deduct the RRSP contribution for the employee at exactly the same amount as the income: eg 40 hours at $1.25 = $50 in the income and deduction columns. At the end of each month the grand total is remitted to the provider and each employee's contribution is detailed.
At the end of the year, the provider sends out the tax receipts to the employees for their contributions.
In Simply, the RRSP income field is set up to deduct only EI and CPP, no taxes. The regular income and the RRSP income make up the total reported on T4s.
Here's my question: If the employees are receiving the tax deduction at source, are they supposed to report the RRSP amount on line 208 of their tax return?
I look forward to replies from those experienced in personal tax returns as well as those with experience setting up payroll in Simply.
In short - yes.
The RRSP amount the company is paying to the provider is included in the employee's income. No tax is deducted on this amount because it will be reducing the employees income on the tax return via the amount on the contribution slip issued by your provider.
So the proper T4 has Employment income AND RRSP income in box 14 "Employment income" and the RRSP amount is noted in Box 40 as "Other taxable benefits" (The Box 40 amount does not include the RRSP twice as most people fear, it is just for CRA statistical usage)
Then the tax return has the entire income amount (Box 14) reported on Line 101 with the offsetting deduction on Line 208.
Debbie Klassen, CGA
Thank you for the excellent reply!
I'm hoping to learn more about T4 prep when I take the third course in the Canadian Payroll Association's certification program, so this sets my mind at ease!
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