You may have noticed this phrase plastered across retail banking advertisements lately. It seems like there are no shortage of financial companies reminding you to contribute to your RRSP before March 1. So what is all the hype about anyway? And why March 1? If you’ve ever found yourself pondering these questions, read on.
The answer to why banks want you to hand over money is a simple one that does not require an explanation. However, why do they insist on you doing this before March 1? The Canadian government allows taxpayers to contribute to something called an RRSP, or Registered Retirement Savings Plan. If you open a savings account, let the government know about it, and follow a few rules, you are allowed to deduct contributions to this account from your taxable income. You save money for the future, and reduce your tax bill at the same time. This is truly a win-win scenario for most people.
This is where the rules come into play. Your personal taxes are due April 30 of each year. The government gives people a bit of extra time in the new year to contribute to their RRSPs pertaining to the previous fiscal year. Not too many people are thinking about their taxes at the end of the calendar year (most of us are busy putting on silly hats and consuming too many beverages around Dec 30…). So, you have until March 1 of each year to contribute to the prior fiscal year. So, for example, any money you contribute by March 1 2013 acts as a deduction against taxable income for the 2012 tax year. Keep this in mind when planning your contributions.
RRSPs? Tax deadlines? Does any of this make your stomach turn? Contact us today for a free consultation. As your trusted accountants in Ottawa, we’ll ease your tax worries.
