T2205 or box 24 of T4RSP

Some tax software, such as UFILE, may not have the function to deal with box 24 of a T4RSP.  Therefore, many maybe unsure what to do.  Therefore, I will provide a solution.

When making contributions to a spousal RRSP, income-splitting is a problem.  Therefore, the Government of Canada created rules to prevent tax filers from abusing the contributions to a spousal RRSP.

In the case of box 24 of a T4RSP, treat the T4RSP as the contributing spouses Statement of RRSP Income if the YES box is checked.  This may result in the couple paying higher taxes.  Unfortunately, unless the couple can prove that the RRSP Income is from the RRSP contributions from 4 years ago or earlier, the possible headache may not be worth the trouble.

An example,

  • YEAR     Contribution     Withdrawl
  • 2001     $500
  • 2002     $500
  • 2003     $500
  • 2004     $500
  • 2005     $500
  • 2006     $500
  • 2007     $500
  • 2008     $500
  • 2009     $500
  • 2010                                          $1000

In the case above, the $1000 withdrawal in 2010 is from the year 2001 and 2002.  Therefore, box 24 of a T4RSP should not be checked.

If the withdrawal is $4500 instead of $1000 in 2010, then box 24 should be checked.  Furthermore, year 2001 to 2007 is the amount that can be entered in the non-contributing spouse’s income.  Therefore, $3500 is the non-contributing spouse’s income from the RRSP.  Year 2008 to 2010 is the amount that can be entered into the contributing spouse’s income.  Therefore, $1000 is the RRSP income for the contributing spouse.

Unfortunately, the couple must keep all RRSP contribution slips from 2001 to 2009 to prove to the CRA that contributions to a spouse’s RRSP were made.

Depending on the situation, the income above can change.  Fortunately, for many Canadian tax filers who have not exceeded their RRSP contribution limits, the above scenario should hold true.

The CRA rules can be found at http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/rrsp-reer/wthdrwls/spsl-eng.html

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