Can I Include RRSP Contributions on This Year’s Tax Return When I Forgot Them Last Year?
In Canada, if you forgot to include RRSP (Registered Retirement Savings Plan) contributions on your previous year’s income tax return, you might wonder whether you can include them in this year’s return. Unfortunately, direct inclusion isn’t possible, but you do have a couple of options to maximize your tax benefits.
Amend Your Previous Year’s Return
One option is to file a T1 Adjustment Request (T1-ADJ), which allows you to amend your previous year’s tax return. By doing this, you can claim the RRSP contributions you missed. This amendment may result in a tax refund or a reduction in any taxes owed.
Earn Unused Contribution Room
If you choose not to amend your previous return, you can still benefit from the unused RRSP contribution room. This unused room is known as a 'carry-forward' status, which means you can make contributions in the current year up to your available limit. This limit includes any contributions you didn’t claim from previous years.
Which Option is Advisable?
It is generally advisable to amend your return to ensure you maximize your tax benefits. You can do this through the Canada Revenue Agency's (CRA) CRA My Account portal or by submitting a paper adjustment request. The CRA can help you with the process and may even offer a tax refund if you were due one.
Notification to Canada Revenue Agency
If you notify the Canada Revenue Agency (CRA) that you omitted to include your RRSP contribution, they may make an adjustment and send you a refund. It's important to report these missed contributions as soon as you realize the mistake to maximize any potential benefits.
RRSP Contribution Limits
In Canada, your ability to contribute to RRSPs is limited to a certain percentage of your earnings. While you are not required to restrict your contributions to this percentage, you can only deduct up to the allowed limit. If you wish to invest all of your earnings, you can do so, but the taxable portion is capped by the allowable deduction.
Conclusion
While direct inclusion of missed RRSP contributions in the current year is not possible, you can amend your previous year’s tax return or carry forward your unused contribution room. Choosing the correct option will help you maximize your tax benefits and potentially receive a refund.