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

[Chris59]

It took me some time to arrive at this solution, so I’ll document it for others.  The only other references that I could find on the TurboTax AnswerXchange on this subject were not helpful.  If I’ve done something incorrect feel free to correct me. 

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the perspective of paying taxes, meaning that you won’t have to pay any tax on the unlocked money until it is later withdrawn from the RRSP.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.

[TurboTaxKim]

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".

[TurboTaxKim]

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]

This seems helpful but I can't see anywhere on the RRSP Contribution screen where I can indicate that this was a "designated transfer of on eligible income amount".  Any suggestions?

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[#5]

This seems helpful but I can't see anywhere on the RRSP Contribution screen where I can indicate that this was a "designated transfer of on eligible income amount".  Any suggestions?

[TurboTaxKim]

@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.

[megantong3]

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

ONLY enter the RRSP/PRPP contribution you are designating as a transfer of eligible income if the amount is not included above." 

but that's not correct. 

You need to type in the amount in the box that you're transferring!

[TurboTaxBrenda1]

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"

[wunlum66]

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?

[marcnewman55]

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?

[Lhub11]

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