I received approval from CRA to reduce tax deduction at source on a lump sum severance payout (T1213) and moved that money into my RRSP. How would I go about indicating this in Turbo Tax for the purpose of my tax return?
thanks for your help
The request and the approval are already on file at CRA. Enter all your slips as usual and CRA will match things up at their point.
I hope that your payroll who issued you the severance package have a copy of the form so the reduce the tax on your severance payment. Usually payroll deals he form T1213.
Yes, Delphision is right, your tax return will be match with what CRA has got on file for you.
Good point Sally. I was assuming the actual payment and tax amount had been dealt with.
Hi Delphision, form T1213 is a form that you would submit to your payroll and then to CRA in order to request a reduction in tax withholding. Upon approval, CRA issue a "Letter of Authority" good for one calendar year, or it is issue for one lump sum. This is the form from CRA web site: http://www.cra-arc.gc.ca/E/pbg/tf/t1213/t1213-14e.pdf
Because severance payment is not considered employment income such as salary or wages, for payroll purpose, the tax withholding calculation is different, and there is another rate to use, special for lump sum, that can be heavy. There is no exemption on a severance payment. These are the rate http://www.cra-arc.gc.ca/tx/bsnss/tpcs/pyrll/clcltng/spcl/lmpsm/wthhldng-eng.html, in Quebec there are two rates, federal and provincial, outside Quebec there is only one rate which combines federal and provincial rate.
Also, the user is talking about receiving a severance payment at the end of employment. Only in Ontario, severance payment is provincially legislated, and with the employees of the federal government. All other provinces and territories in Canada do not have a provincially legislated severance payment upon termination /lay off of employment.
Very nice! thank you for taking the time. I have had no experience with this item.
Thanks all for your help on this topic. I have entered the lump sum payment into my RRSP from my severance as I would have with my regular RRSP contribution into Turbo Tax. The problem is that there is no way for turbo tax to know that I have not paid tax yet on this amount. In other words, it is showing a large refund. When CRA does the matching, it sounds like I will have to pax tax on the severance despite having moved it into an RRSP.
Hi, as Delphision mention, CRA should have a record on file for you that you submitted a T1213 form, and that it must be approved. You should have received a letter from CRA stating that yes, reduced tax withholding on your severance is approved, and I hope you gave a copy to your payroll. Should you have any further concerns, you are free to call CRA at 1-800-959-8281 to check things out. Your severance payment is straight cash on your tax return to report on line 130, but then you get the RRSP deduction. This gives you a nice break. Did you get a tax slip for your severance payment? Form T4A slip is issued a lot for lump sum amount, in that situation you could report the income tax withholding, had you have any. This is one question you ask to CRA.
Hi Delphision, not a problem, this is very much payroll and then income tax. Glad to help.
Hi, I am in the same situation. I took a Payment In Lieu (PIL) of Severance from the Federal Government. I submitted a T1213 form to CRA received an approval letter and gave it to my employer. I received the payment with no taxes removed and put it into my RRSP. My total salary in Box 14 of my T4 included that PIL payment (no T4A was issued).
A CRA Rep mentioned that the PIL payout $ should be recorded as a RRSP Designated Transfer in Schedule 7 so that that portion from PIL $ would not be taxed, however I get the following error "The amount you designate for transfer to an RRSP/PRPP cannot be greater than the eligible income reported for transfer." Because of this error, I cannot file my taxes, yet when I remove the transfer I owe a huge amount of taxes.
Am I reading you correctly in that I should enter nothing for RRSPs, submit with taxes owing, and let CRA work it out?
Eric
You can also make the appropriate change and mail it in rather than trying to netfile a special situation.
Hi there, no T4A slip was not issued for "Payment in Lieu of notice" instead, because this payment is considered income from employment for payroll purpose, therefore is included in your earnings on your T4 slip. Now, if your job gave you the cash and then you made the deposit, then it is not a transfer, it is just a contribution. Did your job put the money in your RRSP? Had you provide them with your RRSP banking information, then this would be a transfer.
You can very well, claim the RRSP contribution as a regular contribution without specifying that it is a transfer.
My employer gave me UNTAXED cash and I deposited it into an RRSP account. So I believe I have to show that it went into an RRSP (because it was untaxed) but not claim the tax deduction because no taxes were taken off. That is why I used the RRSP transfer option to reduce my taxable income by the PIL amount.
Are you saying that I should just treat it like a regular RRSP deposit, even though I have a T1213 on file, so that the RRSP contribution reduces my income tax amount? Would that not result in a double RRSP tax credit?