When’s the RRSP Contribution Deadline? Key Dates your Client Needs to Know

The 2022 RRSP deadline is fast approaching! This is the time of year when Canadians tend to rush and contribute a little extra in order to unlock a bigger tax refund.

Here are the key things your client needs to know about the RRSP deadline:

When is the deadline to contribute to an RRSP?

March 1, 2022 is the deadline for your client to contribute to their RRSP for the 2021 tax year. This is the last day that they can contribute to their RRSP if they want to take advantage of deductions and increase their tax refund this spring.

Why is it important to meet the deadline?

The deadline is important simply because your client will reap immediate benefits when it comes to their tax return. And tax savings are the biggest benefit of an RRSP to begin with!

What happens if your client misses the RRSP contribution deadline?

If your client can’t contribute before the deadline, no sweat! Any remaining contribution room rolls over and is added to their limit for the following year. They only need to meet the deadline if they want to apply those contributions towards their taxes this year.

How much can my client contribute to their RRSP?

They can contribute 18% of the earned income they reported on their tax return for the previous year (2020), or $27,830, whichever is less, plus any unused contribution room that they have available from previous years.

How RRSP tax deadlines work

You’re probably well aware of this, but The Canada Revenue Agency (CRA) lets your client make RRSP contributions for the previous tax year in the first 60 days of the following year. They do this to give your client time to find out how much employment income they earned in the last tax year and contribute accordingly.

Come tax time, your client may receive multiple RRSP contribution receipts, depending on when they make their contributions. The first will reflect all contributions they made between March 2 and December 31, 2021 and any additional receipts will reflect contributions they make in 2022 before the March 1 deadline.

Keep in mind, they don’t actually need to wait for their official RRSP receipts to file taxes. If your client knows the amount they contributed, they can report it on their return. The official receipts will ultimately come in handy for reference if they’re audited.

Automatic contributions

Did your client procrastinate on their RRSP contributions this year? They are certainly not alone. A full 60% of Canadians tend to wait until the last two weeks before the deadline to contribute.

But the last-minute scramble is stressful — and costly in the long run. When your client waits until the bitter end of the year to save, they can miss out on the potential for compounding growth in their investment accounts.

Have a conversation with your client and encourage them to set up automatic contributions online. This will not only make their (and your) life easier, it will probably leave them richer at the end of the year.

What should your client do with their RRSP tax refund?

If your client has been paying income tax and contributing to an RRSP throughout the year, they’ll probably receive a nice tax refund – it may even feel like the government is giving them free money, but in reality it’s the other way around. The government is paying your client back for the loan they gave them throughout the year.

If your client is on track to reaching their investment goals and wants to use the money to go on vacation – well bon voyage and don’t forget the sunblock! But remember to let them know that that money can grow to be worth much more in the future if they choose to invest it back into their RRSP.

For a similar article on RRSP by CI Direct Investing, read What is an RRSP and how does it work? and be sure to share the client-friendly version of both articles with your clients. Knowledge is key!

For more information on the many benefits of RRSPS, contact PPI’s Wealth Management team.

Reposted with permission from CI Direct Investing.

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When’s the RRSP Contribution Deadline? Key Dates you Need to Know