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We’re approaching the April 30 general tax filing deadline, and, as of April 2, the Canada Revenue Agency (CRA) had received over 11.9 million 2023 personal tax returns. Of those, nearly 95% were electronically filed, and only 5% of Canadians mailed in their returns. Of the returns processed to that date, approximately 80% showed a refund, with the average refund amount being $2,194.

When all is said and done, based on last year’s tax return processing statistics, the CRA is expected to receive over 30 million personal tax returns for 2023, meaning that most of us had yet to file at the end of March. That’s not surprising as most Canadians (present company excluded, of course) don’t enjoy the process of filing their taxes.

Clients who made RRSP contributions, either between March 2 and December 31, 2023, or in the first sixty days of 2024 (i.e., Jan. 1 to Feb. 29), should be reminded that all these contributions must be reported on the 2023 tax return even if your clients decide not to deduct all the contributions against their 2023 incomes. Reporting is done on Schedule 7 of the return, where the client enters their contributions in Part A of the form, and then chooses the amount to claim (if any) in Part C, Line 18. After doing so, Part D will calculate the unused portion of their RRSP contributions available to carry forward to any future year. Clients may choose to delay claiming some (or all) of their RRSP contributions, perhaps because they expect to be in higher tax brackets in the future when the RRSP deduction may be worth more.

The reason why it’s important to remind clients of this each tax season is because of a situation we recently encountered: a client’s tax preparer neglected to report the client’s 2020 RRSP contribution on their 2020 return, because they decided not to claim it in 2020. This led to the taxpayer mistakenly making the same RRSP contribution again in 2021, without having enough contribution room. Once the CRA figured this out through the electronic matching program, the taxpayer was hit with an RRSP overcontribution penalty tax equal to 1% per month for the excess contributions (above the $2,000 overage permitted).

This can easily be avoided by reminding clients to fully report their RRSP contributions each and every year with each tax return — and use Schedule 7 to defer their claim to a future year.

Jamie Golombek, FCPA, FCA, CFP, CLU, TEP, is the Managing Director, Tax & Estate Planning with CIBC Private Wealth in Toronto.