How to correctly input data for LIRA to LIF conversion and one-time unlocking transfer to RRSP

Thank you for sharing this information 🙂 Your comments are very detailed and informative and I have converted them to an answer. As well attached an answer from TurboTax myself entered shortly after you posted this. 

"With the demise of defined benefit pension plans, the retirement savings plans for many Canadians will end up in a LIRA once they stop working.  In order to withdraw money the LIRA needs to be converted to a LIF.  When that happens many provinces allow a one-time unlocking of (typically) 50% of the funds by moving them to an RRSP.  This gives greater flexibility for accessing that money.  When the unlocking is done, the financial institution holding the LIF will issue two documents to you.  One will show the 50% unlocked value as RIF income and the other will show the value as an RRSP contribution.  The latter cancels out the former from the perspective of paying taxes, meaning that you won’t have to pay any tax on the unlocked money until it is later withdrawn from the RRSP.  How to input these two documents into TurboTax?  I’m using TT Standard download version and I’m using “Forms”, not the “EasyStep Interview”.  The income is just input in the “Federal Slips” dialog for “T4RIF”.  The amount on the RRSP receipt for the 50% unlocked value needs to end up in line 208 of the T1 General.  Double-click there to bring up the RRSP receipt input screen.  My RRSP receipt value needs to be input into two places, “Contribution made between March 2 and December 31, 2018” and “Designated Transfer of eligible income amount”.  That wasn’t intuitive to me (I first tried one then the other, but not both - see screenshots below).  If the developers are reading this can I suggest that it would be better if the “Designated Transfer” line was a question like the two previous.  I would have just answered “Yes” to a question “Is this a Designated Transfer of eligible income amount?” and TT would have allowed the contribution to exceed the “RRSP deduction limit for 2018” value, which it won’t normally do".

When your LIRA is converted to a LIF, you should have two tax slips - a T4RSP or a T4RIF showing a withdrawal amount, then a corresponding "Contribution Slip" (or receipt) showing the direct transfer which is exempt due to subparagraph 60(l)(v). Both these slips need to be reported on the tax return.

Report the T4RSP or T4RIF as income (Income > Tax Slips > choose the slip you have then proceed to that screen and enter the corresponding boxes) . The Total Income will reflect the amount of the transfer, but do not worry, this amount will be deducted in the next section to arrive at the Net Income.

Then enter the RRSP or RRIF receipt as an "RRSP Contribution" in the RRSP Profile section. You need to specify on the RRSP Contribution screen that this was a "designated transfer of on eligible income amount".

@Brian45

The version of TurboTax you are using will determine how you will enter the transfer. 

• If you are using TurboTax Online, you will need to enter this way:
  • From the sidebar in TurboTax, click on RRSP > RRSP Profile > and check the box beside Transfer to RRSPs.
  • Then when you continue through, you will land on a page titled "Transfers to RRSPs/PRPPs. On this page the amount you enter from the corresponding T-slip should show up there and can be "designated" as a transfer.
• If you are using TurboTax installed on your computer from a CD/Download
  • You need to check off that you made an RRSP Contribution in the RRSP Profile
  • Then on the contribution page, you will enter the amount of the transfer as a regular contribution, and again on the same page as a Designated Transfer.

The attached screenshots show the entries you need to make for both versions of TurboTax.

There is a MISTAKE in turbotax here. It says : "

When your LIRA is converted to a LIF, you should have two tax slips - a T4RSP or a T4RIF showing a withdrawal amount, then a corresponding "Contribution Slip" (or receipt) showing the direct transfer which is exempt due to subparagraph 60(l)(v). Both these slips need to be reported on the tax return.

Report the T4RSP or T4RIF as income (Income > Tax Slips > choose the slip you have then proceed to that screen and enter the corresponding boxes). The Total Income will reflect the amount of the transfer but do not worry, this amount will be deducted in the next section to arrive at the Net Income.

Then enter the RRSP or RRIF receipt as an "RRSP Contribution" in the RRSP Profile section. You need to specify on the RRSP Contribution screen that this was a "designated transfer of on eligible income amount"

I'm using the Easy Step process in TurboTax 2019 and I don't know where to enter the "designated transfer of an eligible income amount".  Help, please?

Has the process changed since last year - I do not get the options indicated on this reply when I enter the RRSP contribution on the page -  the system did correctly deduct the RRSP contribution to match my T4RIF for the transfer so that was fine but I notice that the system then wiped out my estimated RRSP contribution room.  Is this just a programming issue ( will it get properly reflected by CRA when I get my tax assessment) or should I be concerned?

Where do we enter to offset rrsp and rrif. From unlocking lira.  I did tax info prior to entering

  I did not get the money from rrif t4.  Is there a form we need fill out ?  I entered rrsp amount then under designated transfer ? Anything else for it.  

I don't want my rrsp room changed 

You need to start by entering your T4 Slips- T4(RIF) and the T4(RSP) Once that has been entered and you continue you will go to RRSP Profile for 2022 and check off the box that says Transfers to RRSP's and any other one that needs to be checked off and continue. You will then enter your 2022 RRSP/PRPP Deduction limit and click continue. You will then enter the information required on RRSP Contribution page and click on Done With RRSP's you will then see your RRSP Contribution Summary- Click Done with RRPS's. The following page will be  the "Transfers to RRSPs/PRPPs and will be able to enter your amount there. Then you will need to click continue for it to save. 

Thank you for choosing TurboTax.

In fact it did work for me that way for 5-6 years but for the last two years CRA investigated my tubotax  report (online version) and they told me that doing the way it is explained here is not the proper way because the  contribution amount to put back the amount in the LIRA appears as Other Deduction which is not ok.

They told me that you need to put $0 in te Other deduction line 23200 (for the CRI transfer), it needs to be filled in the Schedule 7 (annexe in french) at the line 20800, 24500 and 24640. Unfortunately Turbotax online version does not fill this schedule 7 properly and CRA keeps reviewing my tax report every year now. I dont know if Turbo tax can contact CRA and change their programs accordingly. If Turbo tax need a copy of the CRA answer they can contact me.

@JMRivest Please contact our phone support team at 1-888-829-8608 as they will be better able to assist you.

I would love to contact support to get help but when i contact them and they dont even know what a LIRA or RRSP is, that is kind of scary. Do you have a support number for Canada, more specifically for Quebec where we have to fill two different income tax reports, one provincial, one federal, with support people who knows how income tax works, not only how your program works.

Once again, in 2023, after the previous message, CRA took 9 months to reimburse because they were investigating my LIRA to RRSP transfer saying that it was not reported correctly. Thanks.

In order to help you, I suggest you contact CRA prior to entering your slips in the software. Let us know how CRA tells you to enter the data and we will be in a better position to tell you the steps in TurboTax. This is a good time to call as tax season is not in full swing yet. 

Call 1-800-959-8281 

• Monday to Friday: 8 am to 8 pm (local time)
• Saturday: 9 am to 5 pm (local time)

Thank you for using TurboTax

If you read the message just before in the thread, i am telling you what the CRA wrote to me after reviewing it.

''They told me that you need to put $0 in te Other deduction line 23200 (for the CRI transfer), it needs to be filled in the Schedule 7 (annexe in french) at the line 20800, 24500 and 24640. Unfortunately Turbotax online version does not fill this schedule 7 properly and CRA keeps reviewing my tax report every year now.''

With TurboTax Online, you will not see the schedules before printing the whole return. May be consider using TurboTax Standard download to have access to all forms and schedules as you are doing your return. 

I recreated the steps in TurboTax Deluxe On line. There are many steps. First enter the income and then the RRSP contribution as follows: 

Step 1 - in your Profile, check the box that you have made a contribution to RRSP

Step 2 - a little further on the same page, check that you have made a withdrawal from a retirement account according to the slip you have received. I used a T4RIF/RL 2

Step 3 - click on T-Slips under Income in the left menu. Click on the slip you have received as Income from your LIRA.

Step 4 -  enter the information from your slip. Enter the amount again in Transferred to a RRSP Box 24. Click on Enter Relevé 2. The information might already be there in Box B and B(1) below. If not, enter it. Click Done with T4 and RL 2

 Step - 5  Continue until RRSP section. Enter the amount transferred from LIRA to RRSP. 

All amounts are in order in the Summary:

Step 6 -  verify in the Federal detailed summary that amounts are in order:

Step 7 - verify in the Provincial detailed summary that the amounts are in order:  

Let me know if this answers your question. Thank you for choosing TurboTax

Thanks i will try reporting it like this for 2023. Previous years I was using the Online Premier version , should it be working the same or I should use the Deluxe version?

Using Premier Online will look the same as Deluxe. Follow the same steps. Please let me know if it works. Thank you.   

It looks like TurboTax Desktop Standard 2023 has fixed these issues and Schedule 7 lines 24500 and 24640 are filled out properly as long as you enter your LIF to RRSP transfer amount in **both** of the RRSP slip fields: a) "Contribution made between...", and b) "Designated Transfer of eligible income amount".

However, there appears to be one more related problem regarding calculation of the Pension Income Amount deduction (line 31400).  TurboTax 2023 seems to think the LIF to RRSP transfer amount is eligible for generating up to a $2000 Pension Income Amount deduction, which it is not.  The problem appears to be in the Pension Income Worksheet, which is not being populated with the transfer amount on line 5.  In my case line 5 is blank and I cannot enter a value there.  This leads to a miscalculation on lines 6 and 7 on the Pension Income Worksheet, which generates a false value for line 14 (which used to populate line 31400).

Is line 5 of the Pension Income Worksheet a calculated value?  If so which forms and lines input to the calculation?  As a temporary workaround I can override the value on line 14 and make it $0 to nullify the Pension Income Amount deduction.  However, I am not sure if the CRA will like this and perhaps it may generate a review flag for my return.  Please advise on how to solve this issue properly.

@SteveS2 

Please contact our phone support team at 1-888-829-8608 as they will be better able to assist you.

I made a 50% transfer from a LIF to my RRSP in the first 60 days of 2024.  I received a RRSP contribution statement for the first 60 days, but I will not receive a T4RIF as this is 2024 income.  There should be no tax impact from this transfer, but as I see it the CRA will want me to claim the RRSP contribution in 2023 and I will be over my contribution limit, with no offsetting income charged.  Please let me know what to do.

@Crewster Have you confirmed with the CRA that they want you to claim the LIF to RRSP transfer in 2023?

If you are in Canada or the United States, you can call the CRA at 1-800-959-8281. If you are elsewhere, you can call 613-940-8495. This page has more ways to contact the CRA: Contact the Canada Revenue Agency

Put another way, I first moved my LIRA to a LIF. Then I transferred 50% to my RRSP. All of this happened in the first 60 days of 2024. For the 2023 tax year the only form I got was a contribution to my RRSP for the 50% transfer.  I will get my other tax form next year on a T4RIF. 
So for 2023 do I just forward it to next year and do I state it is an eligible transfer in the first 60 days?  I do not want this to have any impact monetarily and with my contribution room. 
please help

I did exactly this right before the end of 2023, so my T4RIF and RRSP slips were applicable to the 2023 tax year.  I believe it's important to use them both in the same year since:

1. You need the RRSP deduction on line 20800 to cancel out the Pension income to be declared on line 11500 from your 2024 T4RIF, otherwise you will be paying tax on the transfer amount in 2024.

2. You also have to declare the transfer on line 5 of the Pension Income Worksheet to cancel out the Pension income amount on line 1 of the same worksheet (from line 11500 of the tax form).  This is to ensure the transfer amount does not contribute to the $2000 Pension Income Deduction.

3. For the RRSP part, you also have to indicate this is a transfer which will not impact your contribution room.  This is accompished by entering the RRSP deduction amount in both the appropriate Contribution box and also into the Designated Transfer of eligible income amount box of the RRSP T-Slip entry form.

Using the steps above I was able to submit my 2023 taxes and they were accepted and reviewed with no issues.  I have received my notice of assessment and all is correct.

Regarding your main question, as far as I know it is your option whether you declare an RRSP deduction in the first 60 days as applicable to the current or previous tax year.  The convention is to use the previous year (as per the TurboTax form labels), but I don't think it is mandatory.  In your case I believe you would likely want to declare this special LIF to RRSP transfer deduction in 2024 (using the March-December contribution box of the 2024 tax forms).  I am not a tax accountant, so please check my advice with a professional, or call the CRA to confirm.