Retiring Allowance (Company Service Pay)

[Alistair]

My wife left her current position effective Jan. 31/2021 and subsequently received a retiring allowance, composed of both an "eligible" and "non-eligible" amount. Both of these amounts were directly transferred into an RRSP, with her having plenty of room in her RRSP deduction limits for the "non-eligible" amount. I'm having trouble understanding how to report/claim this because, due to the date of her departure from the position, she received RRSP contribution receipts for both amounts. However, the retiring allowance will not show up as income until the T4 is issued for 2021. I understand that a designated transfer must be reported in the same tax year as the "eligible" retiring allowance is received (2021), and is therefore reported as a contribution on 2020 tax return, but is not deducted and carried forward. How is the "non-eligible" portion of the allowance handled? Is the contribution receipt for this also held until next years taxes when the retiring allowance will show up as income? 

[TheTaxSmith]

Hi Alistair.

You can enter the non eligible RRSP receipt in the RRSP data entry for first 60 days and then limit the deduction for 2020. The eligible portion will appear on a T4A in 2021 and there will also be a transfer reported on the slip.

The simplest approach is to wait until you are completing the 2021 file and enter the RRSP for the non eligible then. You don't enter the eligible portion of the RRSP anywhere if you enter a transfer from the 2021 T4A.

[Alistair]

Thank you for the quick response! So , if I'm understanding you correctly, best approach would be to do nothing at all on 2020 return.....declare everything next year on tax return for 2021?  Alistair

[TheTaxSmith]

Yes.

[MikeN]

Hi, I have the same situation as above - retiring allowance (retired Jan 31, 2021), composed of both an "eligible" and "non-eligible" amount direct transfer to my RRSP in the first 60 days of 2021. I received an RRSP contribution for both. Data was downloaded into UFILE and show under 2021 First 60 days, I plan to use the eligible transfer RRSP amount for 2021 as I had already contributed by full 2020 amount in 2020.

UFILE now gives a message "RRSP contribution exceeds deduction limit", how do I remove this message? UFILE provides an option to remove the two "first 60 days" amount lines, but unsure if that is the correct process as CRA states "First 60 day contributions must be reported" but can be flagged for current year.

 

Thanks