How to avoid RRSP Over Contributions

It is a sometimes confusing and not well understood fact, but over contributions to your RRSP may be subject to  penalties.  This penalty tax is exorbitant! To help avoid this additional tax burden, read the following tips on RRSP Planning and advance strategies.

If you inadvertently contribute more than your contribution limit, you will be subject to a 1% penalty tax per month to the extent that the over contribution amount exceeds $2,000.  This penalty tax is exorbitant so it is not worthwhile to make over contributions above the limit. Canada Revenue Agency has stepped up its monitoring of RRSP over contributions lately, so here are some tips to help avoid paying this additional tax burden.

 

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Managing Severance Packages

Severance Pay, Retiring Allowances, Tax Deferral, RRSP Transfers.  If you need to know more about these subjects, then the following article may be of value to you. 

With the downturn of the economy, some who have lost their jobs, may have received large sums in severance and the uncertainty of what to do with it.

Although receiving a large or modest severance package can help soften the blow of losing your employment, the sudden influx of cash can have serious tax consequences if not managed properly. In some cases, it might even be beneficial to negotiate with your employer and arrange to receive severance payments after January 1.

If severance is a one-time payment or a fixed amount payable over a short period with respect to loss of employment, or after retirement in recognition of long service (without continuation of employment benefits), it’s considered a retiring allowance. Retiring allowances are fully taxable in the year received. However, a portion may be eligible for transfer to the recipient’s RRSP, resulting in a deferral of tax on the amount transferred.

Your life and health insurance benefits also need to be addressed rather quickly — often your group insurance can be converted into an individual policy without the need to provide medical evidence, but there might be only a short period of time to do so. Unless you are in excellent health, this could be your only chance to obtain sufficient insurance coverage at a standard rate.

If you would like more details on this subject please see the complete article, at http://www.liwanpo.com/taxes_personal.php