Receiving error in RRSP Contribution section (designated transfer related)

[jk7702]

Hi,

Before I get into the details, here is some background on the scenario (the numbers are hypothetical, just to make the example easier to follow):

• I left my prior job
• The amount in my RPP from my prior job was unlocked, so I decided to transfer that amount directly to my RRSP ($5K).  The transfer of funds was completed and in the RRSP account in the first 60 days of 2020.
• I also made a regular contribution in first 60 days of 2020 ($7K).

In the RRSP contribution section of the filing:

• One section asks for "Contributions made between January 1 and March 2 (inclusive)."  The total $12K is added here (both the regular contribution and the addition to the account due to the unlocked RPP transfer).
• A few questions below that, the user is asked "Is this RRSP contribution a designated transfer of eligible income amount? If so, enter the amount that is a designated transfer."  The $5K transferred from the RPP is added in this field.

Then at the end of the process, it provides an error message which states:

• "The amount you designated for transfer to an RRSP cannot be greater than the eligible income reported for transfer."

I believe I am answering the questions correctly, so why is this error occurring?  Rather than unlocking the RPP and receiving a taxed cash payment, it was transferred directly to the RRSP.  This follows the definition of a designated transfer, and from what I understand a transfer between a RPP to RRSP should be noted in the filing, so I am not sure why this error message is appearing.

Please let me know if I am misinterpreting anything.  Any guidance on this issue would be greatly appreciated.  Thanks in advance.

[TurboTaxKim]

What is likely happening here is TurboTax is not recognizing any amounts of your Transfer as "Eligible" as you do not have an income slip showing Eligible or Ineligible amounts. This would happen if you did not receive your severance or retiring allowance until 2020 and both Box 66 and 67 of your 2019 T4 are blank.

If this is the case, the following explains this in greater detail. 

When a designated transfer takes place in the first 60 days of the year (2020), the contribution receipt received for the transfer must be reported on the previous taxation year (2019). 

• You'll need to report your RRSP contribution made in the first 60 days of 2020. Do not report it as a designated transfer, report it as a contribution.

•  The RRSP contribution amount is not deducted but carried forward to the following year.  This way it does not reduce the contribution room and is available the following year for the designated transfer. 

•  When you file your 2020 tax return, you will have the T4 with amounts in Boxes 66 and 67 to report as income, and can then apply the carried forward amount as a "designated transfer" to offset that income.

[jk7702]

Thank you for your reply.  I have a few quick follow up questions on this topic, as I want to make sure the fields are input correctly in the RRSP section:

1. I was not provided a contribution receipt for this transfer.  The receiving financial institution stated that because this lump sum amount was already in a registered account (RPP) before moving to the RRSP, a contribution receipt is not provided, the amount cannot be deducted from my income and it would not impact my contribution room.
   • Do they have this correct, or should I get a tax deduction by classifying the transfer as a contribution and carrying forward the amount in box 66 of the 2020 filing (as stated in your reply)?
2. Form T2151 from the CRA is for direct transfers from a RPP to RRSP.  I did not use this and just submitted the form provided by the financial institution (CRA states this is an acceptable alternative), but it seems the T2151 form seems to serve the same purpose (RPP to RRSP).  On the second page of this form, the "Transfers from an RPP" instructions state the following:  "Do not include the amount that you transfer under any of subsections 147.3(1) to (8) in the income of the person for whom you make the transfer.  Also that person cannot deduct the amount transferred.  Do not issue a T4A slip or a receipt for the amount."
   • Does this apply in my situation or is this form tailor to a specific set of transactions?  If I classify it as a contribution for my 2019 return and then specify that it is a designated transfer in my 2020 filing (as was stated in the initial reply), wouldn't the amount be deducted from my income in 2019?

Your guidance thus far has helped as I try to understand the RRSP error I am receiving, so please let me know your inputs when you have a chance.  Thanks again.

[TurboTaxKim]

Thanks for providing us with this extra information. When a true direct transfer takes place, such as you have just described, you will not receive any tax slips. So no contribution slip and no income slip means you do not have to report anything on your tax return. 

It used to be the way up until a few years ago that anytime a "Direct Transfer" took place, there were no tax slips issued and nothing was reported on the tax return. 

In your case, even though you did not use the T2151 form, a suitable alternative was used and no tax slips were issued, making it so much easier to report, or not report the transfer. You do not need to report anything as you have no slips to report 🙂

• On another note, only if you had received a contribution slip for the transfer made in the First 60 Days of 2020, would you report that contribution on your 2019 tax return. But you would not actually claim it, you would carry it forward to 2020 to use against the corresponding income slip issued for that year.