Frustrated with CRA's "rules" Options

[GuyL]

You gotta love CRA's way of looking at things... show good faith and they'll penalize you!

Here's the situation: Every year I contribute the maximum I'm allowed to my RRSP down to the last cent, and I carry *no* unused RRSP contribution room from year to year. Also, I like to contribute early, often putting in at least half of what I'm allowed right in January of the new tax year (so that part gets reported on the previous year's Schedule 7 and then carried forward).

To minimize the giving of what amounts to a free loan to the tax man for a year, in September or October of the previous year I send in a T1213 asking that my tax withheld at source by my employer be reduced, by an amount a bit less then what I figure my real contribution room will be for the upcoming year (ex: If I'm allowed $11k I'll ask for a $10k exemption).

Now here's the rub: The contribution room for the amount that you request a reduction for (for the upcoming year) on the T1213 has to exist at the time they receive the form, even though they have no clue as to how much RRSP money you will contribute during the current year... because you obviously haven't filed a return for it yet. So...if you're like most people who contribute later in the current tax year or the first 60 days of the following year, then they'll allow your request based on the contribution room you have for the current year (even though you might use it all and possibly have no or less contribution for the year you're requesting the reduction for). But if, like me, you contributed in the first 60 days of the current year (and therefore had to declare it on the previous year's Schedule and 7 and carry it forward to the next, now current year), then that contribution room is already "spoken for" and cannot be presumed to be available for the next year...even though, again, they have no clue as to what your actual contributions will be for the current year.

It's as if they base their approval on the presumption that you will contribute nothing during the current year and that the contribution room they know about for the current year will all be available for the next year as well. As long as they don't "see" any contributions for the current year, you're ok. But show that you're serious about your retirement by contributing early for the current year (and not having unused contribution room available) and you get penalized on your request for reduced withholdings. Showing them that you have contributed similar amounts in past years counts for nothing...

So they actually tell me, avoid contributing early in the tax year if you don't want us to "see" contributions for the current year and penalize your T1213 request for the following year.

So much for the "contribute early and use all your available room" idea...