Over-contributed to my RRSP.....and finding a good financial advisor !!!

[looking4alady]

After reading the previous thread on RRSP's, I have a couple points that I need help with.

Right now I'm in a position where I'm over contributed to my RRSP by a fair amount....I guess I was nieve in thinking that there wouldn't be any problems with this, but after talking to Canada Revenue Agency (CRA), I'm told that the most that you can ever over-contribute is $2,000 in your lifetime. I can tell you that I'm over-contributed by $5,000 for the tax year 2006. When I spoke to CRA, they told me about the T1-OVP-06E 2006 INDIVIDUAL TAX RETURN FOR RRSP EXCESS CONTRIBUTIONS that I need to fill out. I have my taxes done for me so I will be mentioning this form to my tax preparer.

I do know that I'll be charged 1% per month for the excess, but if I can hold it over for my 2007 tax year, then I'll pay the small penalty. Some people have said that you should withdraw it (but then I'll be paying Capital Gains on this as it will be income, will it not?)

My question related to this, is can I use this excess contribution towards my 2007 RRSP contributions. I was told "yes" by CRA, but they only gave me a verbal "yes" over the phone but said that it wasn't written down anywheres. Would anyone know?

2. I'm in the market for a person that can direct me on how to properly invest my money. Right now I have investments inside and outside of my RRSP. In addition, I have RRSP's with three different financial institutions. I consider myself to have a good basic knowledge of the invesment world, but I'm wondering if having too many RRSP's spread all over the place is a bad thing? I just started a new job, and they do deductions for RRSP's, so that's another one to add to the pile.

I'm not looking to pay someone hundreds of dollars to tell me "Looking", you're doing well...or "Looking", you don't have any issues. I need to know about tax implications, etc.....or should I not worry?

I've talked to one large accounting firm and the person I spoke to was younger then me, only a CGA, and she told me that basically she charges $800-1200 to fill out my income tax form...but get this, she has a student meet with you and fill out the forms and then the CGA will "review" the work done by the student. And, to top it off, I don't receive any tax advice for the $800-$1200 that I'm paying!

I do deal with professionals in each of the financial institutions that I'm invested in, so they will of course push their own products with their own bias. If I mention my other investments, they put down that institution and tell me to move my investments to their company.

How do I find someone who can provide neutral information???? (and won't charge me thousands of dollars for helping me out !)

Any help would be appreciated.......

thanks,
Looking

 

[sdw]

After reading the previous thread on RRSP's, I have a couple points that I need help with.

Right now I'm in a position where I'm over contributed to my RRSP by a fair amount....I guess I was nieve in thinking that there wouldn't be any problems with this, but after talking to Canada Revenue Agency (CRA), I'm told that the most that you can ever over-contribute is $2,000 in your lifetime. I can tell you that I'm over-contributed by $5,000 for the tax year 2006. When I spoke to CRA, they told me about the T1-OVP-06E 2006 INDIVIDUAL TAX RETURN FOR RRSP EXCESS CONTRIBUTIONS that I need to fill out. I have my taxes done for me so I will be mentioning this form to my tax preparer.

I do know that I'll be charged 1% per month for the excess, but if I can hold it over for my 2007 tax year, then I'll pay the small penalty. Some people have said that you should withdraw it (but then I'll be paying Capital Gains on this as it will be income, will it not?)

My question related to this, is can I use this excess contribution towards my 2007 RRSP contributions. I was told "yes" by CRA, but they only gave me a verbal "yes" over the phone but said that it wasn't written down anywheres. Would anyone know?

2. I'm in the market for a person that can direct me on how to properly invest my money. Right now I have investments inside and outside of my RRSP. In addition, I have RRSP's with three different financial institutions. I consider myself to have a good basic knowledge of the invesment world, but I'm wondering if having too many RRSP's spread all over the place is a bad thing? I just started a new job, and they do deductions for RRSP's, so that's another one to add to the pile.

I'm not looking to pay someone hundreds of dollars to tell me "Looking", you're doing well...or "Looking", you don't have any issues. I need to know about tax implications, etc.....or should I not worry?

I've talked to one large accounting firm and the person I spoke to was younger then me, only a CGA, and she told me that basically she charges $800-1200 to fill out my income tax form...but get this, she has a student meet with you and fill out the forms and then the CGA will "review" the work done by the student. And, to top it off, I don't receive any tax advice for the $800-$1200 that I'm paying!

I do deal with professionals in each of the financial institutions that I'm invested in, so they will of course push their own products with their own bias. If I mention my other investments, they put down that institution and tell me to move my investments to their company.

How do I find someone who can provide neutral information???? (and won't charge me thousands of dollars for helping me out !)

Any help would be appreciated.......

thanks,
Looking

The problem with the "professionals" is they all have agendas and are, in fact, salespeople.

Buy a good tax planning package. About $80 a year. Use the ability to play with your return to determine what is best for you. The good packages include a lot of information on the how and why for each type of deduction.

Get free accounts at each of the financial forums like MS Money, Investor's Village, the Moltley Fool and read the articles. Most of these places are American centric, but the general principles remain the same and you can test ideas from these sites in your tax package.

ps the person at CRA that told you you can use your RRSP overpayment in 2007 is correct. Just reduce what you contribute this year. I use my tax package to determine the level of contribution each year and in Febuary, I run my actual contributions for the previous year in my tax package and contribute the amount necessary to maximize the benefit to me.

 

[LonelyGhost]

you won't pay 'capital gains' on rrsp withdrawals ... its added to
your income as income and that's where the tax hurt comes from.

if you are looking for 'tax deduction' or more important, 'tax reduction'
then you need to look for way to convert non-claimable expenses
into ones that can be claimed: the only way most people can do
this is through a small business.

Most people who work for a paycheque find it impossible to
get around their taxes because there are so few deductions:
Political contributions, charity, medical are the main ones.

As for 'investments', while stocks can be good, every trade
costs you money for broker fees and capital gains ... and
while losses can be converted to a tax credit, they only work
against realized capital gains.

If the situation warrants, you may consider real estate: have a
rental, and then the money you invest in repairs and up-grades
are used against the income the property creates: even better
for a period of UP TO three years, Rev Canada allows you to
use business expenses against other income!

However, after that Rev Can has the 'expectation' that the
business will realize a profit and you can no longer write expenses
against 'other' income (like your salary) but you can write it off
against rental income.

As for getting your taxes done, you need to call around for
an accountant that specializes in it ... though you will find
that they handle big accounts for big money and it may not
be right for you ...

Ironically, Rev Can is actually one of the best sources for tax
information and it just takes time to read their material and
work with it.

 

[Pimmel]

if i had a tax slip for something around your excess, i'd just not report that and use it for 2007. i'd just say i lost it in 2006 and found it to report for 2007.

 

[LonelyGhost]

There are a couple inaccurate statement here. First of all RRSP withdrawals for over contributions aren't included as income at all, because one never received the tax deduction in the first place. And this T1-OVP is why. But penalties may apply.

As far as the real estate issue goes, the 3 year rule for expectation of profit was used by CRA in a supreme court decision and they lost. So as long as there's no personal use to the property you can deduct the expenses. (or capitalize them if appropriate)

1. i was clarifying that rrsp withdrawals in general are NOT capital
gains and are instead income ... I wasn't addressing the over-contribution.

2. news to me ... my understanding was that the '3 year' rule was with
respect to deducting 'business expenses' from 'other' income ... and that
the 'expectation' was that the business would earn sufficient income that
expenses would be applied against business income and not earned salary
from a job.

 

[fun-time-guy]

Hey looking4alady,

Send me a quick PM about the specifics of your situation and I will advise you - no charge.

FTG