Author Topic: Do your owm taxes - Canada  (Read 3832 times)

max9505672

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Do your owm taxes - Canada
« on: February 07, 2017, 10:40:13 AM »
Hi Canadians fellows,

For the first time this year, I'm thinking about doing my own taxes to learn how to do it and save the $50 I use to pay to get them done. I have pretty ''basic'' lifestyle (single, living in apartment, no business), so I think I could efficiently do it.

After some researches, I've found SimpleTax.ca and StudioTax.ca and was thinking about using SimpleTax.ca.

I'd like to know if any have experience with one of those and would like to comment on the quality/ease of use?

Also, what would be the best way to get help if I'd have any questions? Anybody here good at it?

NorthernBlitz

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Re: Do your owm taxes - Canada
« Reply #1 on: February 08, 2017, 02:28:47 PM »
Before we lived in the US we always filed ourselves with U-File. We picked U-File because it was cheaper than other programs like Turbo Tax.

I think that I could usually find it for $20. It's pretty easy, especially if you are a "normal" employee with a T4, some interest income, and RRSP contributions.

Since we moved to the US, I get HR Block software with State (also for $20). The first year we were here, we filed with an accountant, but I bought the software and did it myself to compare the results. They agreed to within $50 (the HR Block calculation was actually a bit more), but the accountant cost >$100. So, now I do my taxes here too. It's pretty much the same since I'm just a W-2 employee (no business / income property).

For less hassle, I try to set up the file for my return in mid-January. Then, whenever I get a receipt I put the number in. In mid-March, I double check everything and send it off. I like that better than collecting all the receipts and doing everything in one shot. I find it less stressful this way.

I am always reluctant to use "free" tax software as it usually means that my data would be saved on some company's servers. It may be silly, but I feel better having it saved on my home computer with less chance of being breached. I think that $20 / year is a small price to pay either way.

max9505672

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Re: Do your owm taxes - Canada
« Reply #2 on: February 08, 2017, 04:24:20 PM »
For less hassle, I try to set up the file for my return in mid-January. Then, whenever I get a receipt I put the number in. In mid-March, I double check everything and send it off. I like that better than collecting all the receipts and doing everything in one shot. I find it less stressful this way.
That's a good advice, thanks!

I think it might be a good idea that, for this year, I do it and also pay someone to do it and then compare results. Then, for upcoming years, I'll know exactly what to do since I expect the same lifestyle for at least 3-5 years.

NorthernBlitz

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Re: Do your owm taxes - Canada
« Reply #3 on: February 09, 2017, 03:46:18 AM »
I think that's a good idea. It takes the stress out of it because you're just "checking" someone else's numbers.

It's a cheap experiment to run.


Prairie Stash

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Re: Do your owm taxes - Canada
« Reply #4 on: February 09, 2017, 01:09:43 PM »
For less hassle, I try to set up the file for my return in mid-January. Then, whenever I get a receipt I put the number in. In mid-March, I double check everything and send it off. I like that better than collecting all the receipts and doing everything in one shot. I find it less stressful this way.
That's a good advice, thanks!

I think it might be a good idea that, for this year, I do it and also pay someone to do it and then compare results. Then, for upcoming years, I'll know exactly what to do since I expect the same lifestyle for at least 3-5 years.
No, run the experiment on last years tax return. There is no need to waste $50, you already have all the data from 2015. SimpleTax is easy to use, I use it and compare the results to Ufile (for free) before sending in. The double check catches any typos I may have made, I have a problem with reversing numbers when I type.

If you cant find last years tax return then you can get it from the CRA site http://www.cra-arc.gc.ca/myaccount/

If you don't have a CRA account, that's where to start. It auto fills simpletax with most of the forms, that's right the accountant can log in, hit autofill and charge $50. Taxes in Canada can be done automatically as of 2015 for simple returns. The CRA account can also be used to send in receipts if they audit you, no need to talk to CRA on the phone.
http://www.cra-arc.gc.ca/esrvc-srvce/tfllmyrtn-eng.html

Automatic tax returns for free; isn't Canada great!

max9505672

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Re: Do your owm taxes - Canada
« Reply #5 on: February 09, 2017, 08:14:06 PM »
For less hassle, I try to set up the file for my return in mid-January. Then, whenever I get a receipt I put the number in. In mid-March, I double check everything and send it off. I like that better than collecting all the receipts and doing everything in one shot. I find it less stressful this way.
That's a good advice, thanks!

I think it might be a good idea that, for this year, I do it and also pay someone to do it and then compare results. Then, for upcoming years, I'll know exactly what to do since I expect the same lifestyle for at least 3-5 years.
No, run the experiment on last years tax return. There is no need to waste $50, you already have all the data from 2015. SimpleTax is easy to use, I use it and compare the results to Ufile (for free) before sending in. The double check catches any typos I may have made, I have a problem with reversing numbers when I type.

If you cant find last years tax return then you can get it from the CRA site http://www.cra-arc.gc.ca/myaccount/

If you don't have a CRA account, that's where to start. It auto fills simpletax with most of the forms, that's right the accountant can log in, hit autofill and charge $50. Taxes in Canada can be done automatically as of 2015 for simple returns. The CRA account can also be used to send in receipts if they audit you, no need to talk to CRA on the phone.
http://www.cra-arc.gc.ca/esrvc-srvce/tfllmyrtn-eng.html

Automatic tax returns for free; isn't Canada great!
That's an even better idea, I'll try this!

My situation has changed though and has been a little more complicated for 2015 than 2016 (full time student in 2015 to full time student AND full time employee in 2016 + RRSP contributions)... But I guess I can still manage this..
« Last Edit: February 09, 2017, 08:35:30 PM by max9505672 »

mrmoolaman

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Re: Do your owm taxes - Canada
« Reply #6 on: February 09, 2017, 11:20:52 PM »
I started using Studio Tax a few years ago when I filed my first tax return ever, and I am constantly trying to convince my friends they can do their own taxes too! Studio Tax is super simple, it literally goes through everything and just asks you yes or no questions about different things, and then gets you to fill in the various values that correspond with boxes on your T4s etc. It is literally foolproof.


Prairie Stash

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Re: Do your owm taxes - Canada
« Reply #7 on: February 10, 2017, 01:32:56 PM »
For less hassle, I try to set up the file for my return in mid-January. Then, whenever I get a receipt I put the number in. In mid-March, I double check everything and send it off. I like that better than collecting all the receipts and doing everything in one shot. I find it less stressful this way.
That's a good advice, thanks!

I think it might be a good idea that, for this year, I do it and also pay someone to do it and then compare results. Then, for upcoming years, I'll know exactly what to do since I expect the same lifestyle for at least 3-5 years.
No, run the experiment on last years tax return. There is no need to waste $50, you already have all the data from 2015. SimpleTax is easy to use, I use it and compare the results to Ufile (for free) before sending in. The double check catches any typos I may have made, I have a problem with reversing numbers when I type.

If you cant find last years tax return then you can get it from the CRA site http://www.cra-arc.gc.ca/myaccount/

If you don't have a CRA account, that's where to start. It auto fills simpletax with most of the forms, that's right the accountant can log in, hit autofill and charge $50. Taxes in Canada can be done automatically as of 2015 for simple returns. The CRA account can also be used to send in receipts if they audit you, no need to talk to CRA on the phone.
http://www.cra-arc.gc.ca/esrvc-srvce/tfllmyrtn-eng.html

Automatic tax returns for free; isn't Canada great!
That's an even better idea, I'll try this!

My situation has changed though and has been a little more complicated for 2015 than 2016 (full time student in 2015 to full time student AND full time employee in 2016 + RRSP contributions)... But I guess I can still manage this..
The other way is to give it a try, if it doesn't work you can always get it done later by someone you pay. That's the mantra of all my DIY projects, I can always pay someone later to do it properly. You can do it, I promise. Filling in RRSP and a T2202A isn't complicated, the only difficulty is making sure you have them before you start. Simpletax walks you through both forms with ease, it will ask for your RRSP room from your Notice of Assessment which is why I suggest the CRA account in case its missing (life happens, people lose them regularly).

I took a 4 hour training course to do taxes as a volunteer...a large part was on client interaction, the taxes part is pretty routine for most folks until you get into small businesses and some other strange stuff (seriously only 4  hours and you can do the majority of peoples taxes). This was meant to assist seniors (some who have never done taxes and are 80), immigrants with language barriers, students with their first filings, low income folks (the volunteering was through the local Food Bank, that's their clientele according to them and not a judgment). I, along with all your other Canadian forum members, will assist with any problems you have.

max9505672

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Re: Do your owm taxes - Canada
« Reply #8 on: February 11, 2017, 01:23:28 PM »
The other way is to give it a try, if it doesn't work you can always get it done later by someone you pay. That's the mantra of all my DIY projects, I can always pay someone later to do it properly. You can do it, I promise. Filling in RRSP and a T2202A isn't complicated, the only difficulty is making sure you have them before you start. Simpletax walks you through both forms with ease, it will ask for your RRSP room from your Notice of Assessment which is why I suggest the CRA account in case its missing (life happens, people lose them regularly).

I took a 4 hour training course to do taxes as a volunteer...a large part was on client interaction, the taxes part is pretty routine for most folks until you get into small businesses and some other strange stuff (seriously only 4  hours and you can do the majority of peoples taxes). This was meant to assist seniors (some who have never done taxes and are 80), immigrants with language barriers, students with their first filings, low income folks (the volunteering was through the local Food Bank, that's their clientele according to them and not a judgment). I, along with all your other Canadian forum members, will assist with any problems you have.
I will give it a shot for sure!

Thanks for your help, and I'll get back here if I need some help.

What's the date limit to fill and send everything?

Prairie Stash

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Re: Do your owm taxes - Canada
« Reply #9 on: February 13, 2017, 08:59:01 AM »
http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/ll-dts/frms-eng.html

April 30th for most of us. However, RRSP top-ups are due at the end of February, some years you have until March 1. Its a good idea to have your taxes roughed in just after valentines day (romantic, instead of roses I do my wife's taxes, it started when she was my GF) to decide if you will be doing a top up. Some receipts don't get in till late February, I try to file early in March, getting it in before St. Patrick's day is the target. 

However, it takes 2 weeks to get a CRA account, its all just waiting for the password. It takes a few minutes to get the application in and you need a copy of your old tax form, they ask for a random number from the 2015 form for security purposes. That can be done early and makes the whole process easier/quicker. Auto-fill is awesome at doing a large amount of the tax return for you, it works with Simple Tax.

Technically late filing is allowed if the government owes you money. There is no penalty as long as you're owed but you won't receive your refund, GST, or other income based cheques. If you owe them money there's a pretty hefty interest rate on the money owed. You can file taxes or re-file taxes for the past 7 years.

in 2014 I messed up my taxes and forgot to claim a deduction. CRA filled it in for me and sent me a larger refund. Their audit is fair, they will fix mistakes that they catch in your benefit as well as theirs.

max9505672

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Re: Do your owm taxes - Canada
« Reply #10 on: February 13, 2017, 04:34:09 PM »
http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/ll-dts/frms-eng.html

April 30th for most of us. However, RRSP top-ups are due at the end of February, some years you have until March 1. Its a good idea to have your taxes roughed in just after valentines day (romantic, instead of roses I do my wife's taxes, it started when she was my GF) to decide if you will be doing a top up. Some receipts don't get in till late February, I try to file early in March, getting it in before St. Patrick's day is the target. 

However, it takes 2 weeks to get a CRA account, its all just waiting for the password. It takes a few minutes to get the application in and you need a copy of your old tax form, they ask for a random number from the 2015 form for security purposes. That can be done early and makes the whole process easier/quicker. Auto-fill is awesome at doing a large amount of the tax return for you, it works with Simple Tax.

Technically late filing is allowed if the government owes you money. There is no penalty as long as you're owed but you won't receive your refund, GST, or other income based cheques. If you owe them money there's a pretty hefty interest rate on the money owed. You can file taxes or re-file taxes for the past 7 years.

in 2014 I messed up my taxes and forgot to claim a deduction. CRA filled it in for me and sent me a larger refund. Their audit is fair, they will fix mistakes that they catch in your benefit as well as theirs.
Great thanks! I'm in the process of getting my CRA account.

What about provincial taxes though?

okits

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Re: Do your owm taxes - Canada
« Reply #11 on: February 14, 2017, 02:08:15 AM »
In order to really learn more about our tax system I suggest you get the paper forms, a pencil, and a calculator and do them manually.  Yes, really.  Reading the forms and booklets and doing the calculations is a great way to learn how our tax system works, the whys and hows behind the various credits, exemptions, and treatment of different types of income.  (Why do you need to know this?  So you can craft your own tax-optimization and wealth-building strategies.)

Once you've done this you can plug your information into a tax software program and see if the results differ from what you calculated.  With any differences you can read up on why the software got a different answer and learn from it.

Saving $50/year in accounting fees is nice but knowing how taxes work could save you a lot more than that (and help you when using the tax software).
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Prairie Stash

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Re: Do your owm taxes - Canada
« Reply #12 on: February 14, 2017, 01:19:21 PM »
Provincial taxes are done at the same time as Federal taxes. SimpleTax walks you through both and has explanations at various steps if you're interested. It will ask what province you're from and fill out the forms for you.

At the end you get a complete tax return that looks exactly like the paper forms for your convenience and records. You don't mail them in, you still use e-file to file so you get your refund within a week. Paper copies are pretty outdated, its up to you if you want to print them or just store them electronically. You still need to store receipts...unless you scan them in :)  I submitted an e-receipt to CRA, they accepted it as proof and were fine with it. I think they prefer it that way over paper now. I was told they use to have some pretty massive warehouses in Winnipeg storing all this data, digitizing is saving them a fortune.

For answers on tax questions and strategies, this is the best site I've seen.
http://www.taxtips.ca/

max9505672

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Re: Do your owm taxes - Canada
« Reply #13 on: February 14, 2017, 05:01:59 PM »
Provincial taxes are done at the same time as Federal taxes. SimpleTax walks you through both and has explanations at various steps if you're interested. It will ask what province you're from and fill out the forms for you.

At the end you get a complete tax return that looks exactly like the paper forms for your convenience and records. You don't mail them in, you still use e-file to file so you get your refund within a week. Paper copies are pretty outdated, its up to you if you want to print them or just store them electronically. You still need to store receipts...unless you scan them in :)  I submitted an e-receipt to CRA, they accepted it as proof and were fine with it. I think they prefer it that way over paper now. I was told they use to have some pretty massive warehouses in Winnipeg storing all this data, digitizing is saving them a fortune.

For answers on tax questions and strategies, this is the best site I've seen.
http://www.taxtips.ca/
I will definitely give it a try! Thanks for your answers, very helpful.

max9505672

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Re: Do your owm taxes - Canada
« Reply #14 on: February 14, 2017, 05:03:10 PM »
In order to really learn more about our tax system I suggest you get the paper forms, a pencil, and a calculator and do them manually.  Yes, really.  Reading the forms and booklets and doing the calculations is a great way to learn how our tax system works, the whys and hows behind the various credits, exemptions, and treatment of different types of income.  (Why do you need to know this?  So you can craft your own tax-optimization and wealth-building strategies.)

Once you've done this you can plug your information into a tax software program and see if the results differ from what you calculated.  With any differences you can read up on why the software got a different answer and learn from it.

Saving $50/year in accounting fees is nice but knowing how taxes work could save you a lot more than that (and help you when using the tax software).
Good idea!

Kimera757

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Re: Do your owm taxes - Canada
« Reply #15 on: February 14, 2017, 08:55:24 PM »
I am always reluctant to use "free" tax software as it usually means that my data would be saved on some company's servers. It may be silly, but I feel better having it saved on my home computer with less chance of being breached. I think that $20 / year is a small price to pay either way.
That's not always true. StudioTax saves your info on your computer, then sends it electronically. If you have to download the program, it's usually pretty safe, you only need to worry about intercepting. (And you can delete the date from your computer.) I have registered for My Account, so in a way my tax info is in the cloud anyway.

RetiredAt63

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Re: Do your owm taxes - Canada
« Reply #16 on: February 18, 2017, 08:09:06 AM »

Great thanks! I'm in the process of getting my CRA account.

What about provincial taxes though?

If you are in Quebec you file separately for provincial tax, and you need the Quebec federal tax forms.  Everywhere else the two are done together.  The tax form asks for province/territory of residence.

I did my taxes on paper for years - that was all there was.  Doing them on paper once, to see how it works, is a good idea.  You can then redo it with software and see how the software handles things. The end results should be the same, of course.  ;-)

My taxes are more complicated than yours and I have always done them myself - you can do this!

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Canadian Ben

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Re: Do your owm taxes - Canada
« Reply #17 on: February 18, 2017, 08:39:58 AM »
Simple Tax now can do Quebec and Federal together.

For people with simple taxes (just a T-4, possibly and R-1 too) it takes less than 10minutes to fill out.

Then you go through the "other optimization" in order to see what types of rebates exist and you can add them in.

The transit rebate is a big one that people forget, but simpletax lists every deduction you can add.

Oh, and it's free!

max9505672

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Re: Do your owm taxes - Canada
« Reply #18 on: March 06, 2017, 07:03:16 AM »
What about someone who worked in 2 different Canadian province? I worked in BC and QC and I have 2 different T4 (1 for each province).

Can SimpleTax manage this?

Canadian Ben

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Re: Do your owm taxes - Canada
« Reply #19 on: March 06, 2017, 08:26:42 AM »
It should, when I filled mine out it asked me if I worked/spent time in another province. It'll ask all sorts of questions and it'll fill out both. Since it can do Quebec and Ontario on the same form, there's no reason it wouldn't be able to do both together.

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Re: Do your owm taxes - Canada
« Reply #20 on: March 06, 2017, 09:57:54 AM »
I've used UFile for years.  They hiked the price of software this year from $22 to $24 so next year I'm going to consider using their online version instead--which would save me about $6. 

This years' was pretty great though--it imported all my T slips (and other things) directly from the CRA.  I only had to verify the numbers and add an extra two slips before filing. 
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max9505672

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Re: Do your owm taxes - Canada
« Reply #21 on: March 06, 2017, 11:33:42 AM »
It should, when I filled mine out it asked me if I worked/spent time in another province. It'll ask all sorts of questions and it'll fill out both. Since it can do Quebec and Ontario on the same form, there's no reason it wouldn't be able to do both together.
Ok thanks, I'll try that

max9505672

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Re: Do your owm taxes - Canada
« Reply #22 on: March 06, 2017, 12:27:58 PM »
Anybody know how to apply the difference between RRSP contribution and RRSP deduction?

For example, in 2016, I put 10K$ in my RRSP, but only want to deduct 5K$ for taxes reasons.

In the ''Contribution to a RRSP and deduction'', all I see are contributions options :

-Your RRSP, from March 1st to December 31 2016
-Your RRSP, from Jan. 1st to March 1st 2017
-Your PRPP, from March 1st to December 31 2016
-Your PRPP, from Jan. 1st to March 1st 2017

Any help on the difference between both?

Cookie78

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Re: Do your owm taxes - Canada
« Reply #23 on: March 06, 2017, 01:13:34 PM »
Wow, so far simple tax has been very easy! I've been meaning to switch over to it for a year or two. Thanks for the nudge!

Canadian Ben

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Re: Do your owm taxes - Canada
« Reply #24 on: March 07, 2017, 05:56:16 AM »
Anybody know how to apply the difference between RRSP contribution and RRSP deduction?

For example, in 2016, I put 10K$ in my RRSP, but only want to deduct 5K$ for taxes reasons.

In the ''Contribution to a RRSP and deduction'', all I see are contributions options :

-Your RRSP, from March 1st to December 31 2016
-Your RRSP, from Jan. 1st to March 1st 2017
-Your PRPP, from March 1st to December 31 2016
-Your PRPP, from Jan. 1st to March 1st 2017

Any help on the difference between both?

Send an email to the Help contact of the website.

Prairie Stash

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Re: Do your owm taxes - Canada
« Reply #25 on: March 07, 2017, 04:40:16 PM »
Anybody know how to apply the difference between RRSP contribution and RRSP deduction?

For example, in 2016, I put 10K$ in my RRSP, but only want to deduct 5K$ for taxes reasons.

In the ''Contribution to a RRSP and deduction'', all I see are contributions options :

-Your RRSP, from March 1st to December 31 2016
-Your RRSP, from Jan. 1st to March 1st 2017
-Your PRPP, from March 1st to December 31 2016
-Your PRPP, from Jan. 1st to March 1st 2017

Any help on the difference between both?
Input all the numbers into simple tax, this is just book keeping. Next year you will have unclaimed credits. 

Then below it you'll see "Optimized Credit and Deductions Table" that's a link to "Summary" which contains the dropdown "Optimized Credits and Deductions". In there you'll see your name (your spouse if applicable) and all the credits you can transfer (charity etc.) as well as RRSP. Click on RRSP and enter a number less than the maximum listed to the right.

max9505672

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Re: Do your owm taxes - Canada
« Reply #26 on: March 07, 2017, 06:31:57 PM »
Anybody know how to apply the difference between RRSP contribution and RRSP deduction?

For example, in 2016, I put 10K$ in my RRSP, but only want to deduct 5K$ for taxes reasons.

In the ''Contribution to a RRSP and deduction'', all I see are contributions options :

-Your RRSP, from March 1st to December 31 2016
-Your RRSP, from Jan. 1st to March 1st 2017
-Your PRPP, from March 1st to December 31 2016
-Your PRPP, from Jan. 1st to March 1st 2017

Any help on the difference between both?
Input all the numbers into simple tax, this is just book keeping. Next year you will have unclaimed credits. 

Then below it you'll see "Optimized Credit and Deductions Table" that's a link to "Summary" which contains the dropdown "Optimized Credits and Deductions". In there you'll see your name (your spouse if applicable) and all the credits you can transfer (charity etc.) as well as RRSP. Click on RRSP and enter a number less than the maximum listed to the right.
Thanks man, that's exactly what I needed :)

Still waiting for some PRPP documents and I should be good to go!

Prairie Stash

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Re: Do your owm taxes - Canada
« Reply #27 on: March 07, 2017, 06:59:57 PM »
Hopefully you don't make a habit of carrying over credits. In the spot where it says maximum allowed contribution you can't exceed it; they allow a grace of $2000 over contributions but after that they start giving penalties. You have to frequent these forums to find it out, regular people don't realize you can max out the RRSP contributions.

Congrats on having to wait for forms, that's a badge of honour.

max9505672

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Re: Do your owm taxes - Canada
« Reply #28 on: March 07, 2017, 09:22:07 PM »
Hopefully you don't make a habit of carrying over credits. In the spot where it says maximum allowed contribution you can't exceed it; they allow a grace of $2000 over contributions but after that they start giving penalties. You have to frequent these forums to find it out, regular people don't realize you can max out the RRSP contributions.
No don't worry, I keep a register of every RRSP contribution I make. I am close but still not at max RRSP contribution :)

Goldielocks

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Re: Do your owm taxes - Canada
« Reply #29 on: March 09, 2017, 04:48:25 PM »
Hopefully you don't make a habit of carrying over credits. In the spot where it says maximum allowed contribution you can't exceed it; they allow a grace of $2000 over contributions but after that they start giving penalties. You have to frequent these forums to find it out, regular people don't realize you can max out the RRSP contributions.

Congrats on having to wait for forms, that's a badge of honour.
Carrying RRSP credits is not quite the same as an over contribution.

Eg.
You only made $40 k this year because of an awesome 6 month sabbatical. But you had room for $10 k and put in $10 k.

Next year you will make $100 k. With much higher marginal tax rate.

You can choose to not claim all 10k on this year's taxes but wait a year. Meanwhile your money earns tax deferred. But you don't get the taxes back yet.

Next year you claim he $10 k plus any new contributions and get a lot more money back.

The whol time, you at at or under your limit, so no penalties for being over by more than $2 k.

Prairie Stash

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Re: Do your owm taxes - Canada
« Reply #30 on: March 10, 2017, 08:17:43 AM »
Hopefully you don't make a habit of carrying over credits. In the spot where it says maximum allowed contribution you can't exceed it; they allow a grace of $2000 over contributions but after that they start giving penalties. You have to frequent these forums to find it out, regular people don't realize you can max out the RRSP contributions.

Congrats on having to wait for forms, that's a badge of honour.
Carrying RRSP credits is not quite the same as an over contribution.

Eg.
You only made $40 k this year because of an awesome 6 month sabbatical. But you had room for $10 k and put in $10 k.

Next year you will make $100 k. With much higher marginal tax rate.

You can choose to not claim all 10k on this year's taxes but wait a year. Meanwhile your money earns tax deferred. But you don't get the taxes back yet.

Next year you claim he $10 k plus any new contributions and get a lot more money back.

The whol time, you at at or under your limit, so no penalties for being over by more than $2 k.
Its tax deferred, that's the problem. You are committing to paying future taxes and getting nothing now in return. The better strategy is to dump it into TFSA, you get nothing now and pay nothing later. In some cases a regular investment account will beat out the RRSP deferral strategy, Dividend and capital gain taxes are much less than the tax rate on RRSP withdrawals. 

I mentioned the over contribution only as a warning, not everyone realizes that they can't dump unlimited money into the RRSP accounts now and just claim the credits later. If you exceed the contribution limit by more than $2000, regardless of claiming the credits, you will pay a penalty to CRA. You are required to fill out CRA form T1-OVP, RRSP Excess contribution

In any event if the TFSA isn't maxed an RRSP credit means you bought yourself extra future taxes.

Goldielocks

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Re: Do your owm taxes - Canada
« Reply #31 on: March 10, 2017, 11:26:04 PM »
Hopefully you don't make a habit of carrying over credits. In the spot where it says maximum allowed contribution you can't exceed it; they allow a grace of $2000 over contributions but after that they start giving penalties. You have to frequent these forums to find it out, regular people don't realize you can max out the RRSP contributions.

Congrats on having to wait for forms, that's a badge of honour.
Carrying RRSP credits is not quite the same as an over contribution.

Eg.
You only made $40 k this year because of an awesome 6 month sabbatical. But you had room for $10 k and put in $10 k.

Next year you will make $100 k. With much higher marginal tax rate.

You can choose to not claim all 10k on this year's taxes but wait a year. Meanwhile your money earns tax deferred. But you don't get the taxes back yet.

Next year you claim he $10 k plus any new contributions and get a lot more money back.

The whol time, you at at or under your limit, so no penalties for being over by more than $2 k.
Its tax deferred, that's the problem. You are committing to paying future taxes and getting nothing now in return. The better strategy is to dump it into TFSA, you get nothing now and pay nothing later. In some cases a regular investment account will beat out the RRSP deferral strategy, Dividend and capital gain taxes are much less than the tax rate on RRSP withdrawals. 

I mentioned the over contribution only as a warning, not everyone realizes that they can't dump unlimited money into the RRSP accounts now and just claim the credits later. If you exceed the contribution limit by more than $2000, regardless of claiming the credits, you will pay a penalty to CRA. You are required to fill out CRA form T1-OVP, RRSP Excess contribution

In any event if the TFSA isn't maxed an RRSP credit means you bought yourself extra future taxes.
I did not suggest that anything was better in one scenario than another. Only showing that the maximum @$2k over contribution is utterly different from deferring claiming your tax deduction until a high tax year.

  Not claiming RRSP deductions until a future highly paid year can be a great advantage in the right specific situation.... which includes maxing out your TFSA first.

max9505672

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Re: Do your owm taxes - Canada
« Reply #32 on: March 25, 2017, 04:36:12 PM »
Ok so most of the report is done in SimpleTax. I just have a two questions :

1. I was still considered a student for 2/3 of the year and if I'm not mistaken, some of my tuition fees (such as books) are tax deductible. I filled the T2202A/TL11 (and RL-8 for Quebec taxes) for my tuition inscription fees, but I don't find anywhere to add other fees (such as books) in SimpleTax. Anyone knows where I can put those tuition expenses?

2. My goal for this year as for RRSP deduction is to deduct just enough to bring in the lower tax bracket. According to TaxTips.ca, for 2016, the Combined Federal & Quebec Tax Brackets and Tax Rate is 28.53% up to 42,390$, which is what I'm shooting for.

The thing is, my total income for federal and provincial is different (because of some scolarships and other things).

For example :
Federal income : 45000$
Provincial income : 52000$

So I'm not too sure what RRSP amount I should deduct in order to bring me in the lower tax bracket... Should I aim for Federal or Provincial? Any other suggestion?

Thanks

Goldielocks

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Re: Do your owm taxes - Canada
« Reply #33 on: March 25, 2017, 06:29:18 PM »
For tuition -- you enter in the fees (that you paid yourself / were not reimburse for) from your T 2202A form, then enter the stated months of full time / part time. 

The months of school translate into the books and supplies credit, regardless of how much you spend on books and supplies, it is the same for everyone. 

max9505672

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Re: Do your owm taxes - Canada
« Reply #34 on: March 26, 2017, 02:48:03 PM »
For tuition -- you enter in the fees (that you paid yourself / were not reimburse for) from your T 2202A form, then enter the stated months of full time / part time. 

The months of school translate into the books and supplies credit, regardless of how much you spend on books and supplies, it is the same for everyone.
Thanks!

max9505672

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Re: Do your owm taxes - Canada
« Reply #35 on: March 27, 2017, 06:11:53 PM »
Any opinion on the RRSP deduction question?

FIRE_at_45

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Re: Do your owm taxes - Canada
« Reply #36 on: March 27, 2017, 07:33:28 PM »
Hi all, I'm debating using StudioTax or Simple Tax.  I've used Studio Tax before but I have one problem.  I'm divorced but my kids currently are not my dependents....based on time.  I still have childcare expenses but with their wizard thing I can't add the childcare expenses without setting my kids as dependents.  Anyone an expert here? 

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RetiredAt63

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Re: Do your owm taxes - Canada
« Reply #37 on: March 28, 2017, 06:06:37 AM »
Anyone else having problems with TurboTax?  Yesterday it wouldn't do updates, I had to uninstall and reinstall.  And then last night and this morning it won't do the CRA connection for data downloads. 

Free software - I tried Genutax and it wasn't compatible (Windows 7 but professional).  Simple Tax?  Studio Tax? Something else?  I want to see how they handle the CRA data download.
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Canadian Ben

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Re: Do your owm taxes - Canada
« Reply #38 on: March 28, 2017, 06:22:24 AM »
Any opinion on the RRSP deduction question?

Have you looked at how much you will be making next year? You might want to keep the contributions for next year if you are expecting to make a lot more...

If not, simple tax will allow you to see exactly how much you are getting back from the contributions (so you can stop whenever the return is no longer as effective, and would be best used another year)

Canadian Ben

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Re: Do your owm taxes - Canada
« Reply #39 on: March 28, 2017, 06:23:40 AM »
Anyone else having problems with TurboTax?  Yesterday it wouldn't do updates, I had to uninstall and reinstall.  And then last night and this morning it won't do the CRA connection for data downloads. 

Free software - I tried Genutax and it wasn't compatible (Windows 7 but professional).  Simple Tax?  Studio Tax? Something else?  I want to see how they handle the CRA data download.

Simple tax works with your browser, so there should be no issues with your windows edition.

Canadian Ben

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Re: Do your owm taxes - Canada
« Reply #40 on: March 28, 2017, 06:25:14 AM »
Hi all, I'm debating using StudioTax or Simple Tax.  I've used Studio Tax before but I have one problem.  I'm divorced but my kids currently are not my dependents....based on time.  I still have childcare expenses but with their wizard thing I can't add the childcare expenses without setting my kids as dependents.  Anyone an expert here?

I can't go into comparisons with studio tax, however simple tax does have the dependants as part of the forms, as well as the different forms you need to claim expenses.

You should be able to use it without a problem; as long as you are okay with them saving your information on the Cloud.

max9505672

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Re: Do your owm taxes - Canada
« Reply #41 on: March 28, 2017, 07:28:35 AM »
Any opinion on the RRSP deduction question?

Have you looked at how much you will be making next year? You might want to keep the contributions for next year if you are expecting to make a lot more...

If not, simple tax will allow you to see exactly how much you are getting back from the contributions (so you can stop whenever the return is no longer as effective, and would be best used another year)
I am going to be making more in 2017 and for sure want to keep deductions for next year(s) (I currently contributed more than want I will deduct).

I am just trying to figure how much exactly to deduct. As I said, my strategy is to deduct just enough in order to get me in the lower that bracket. But since my provincial and federal incomes have a substantial difference (around 15%), I not quite sure what to deduct.

Surely, I could try as long as the return/$ isn't as effective, but I'd prefer to understand how it works exactly.

Thanks!

Canadian Ben

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Re: Do your owm taxes - Canada
« Reply #42 on: March 28, 2017, 07:37:42 AM »
Easiest way to see: Change the contribution numbers in Simple tax, and calculate the return on the left side (you'll see the +/- after each change)

It'll automatically do the calculations for you.

Both provincial and federal are done concurrently on your yearly income, so you are not deducting one or the other, but rather both at the same time. (Your RRSP reduction brings down the total you made in the year)

FIRE_at_45

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Re: Do your owm taxes - Canada
« Reply #43 on: March 28, 2017, 07:44:53 AM »
Hi all, I'm debating using StudioTax or Simple Tax.  I've used Studio Tax before but I have one problem.  I'm divorced but my kids currently are not my dependents....based on time.  I still have childcare expenses but with their wizard thing I can't add the childcare expenses without setting my kids as dependents.  Anyone an expert here?

I can't go into comparisons with studio tax, however simple tax does have the dependants as part of the forms, as well as the different forms you need to claim expenses.

You should be able to use it without a problem; as long as you are okay with them saving your information on the Cloud.

Thanks, I've tried contacting them by email so we'll see if I hear back.  I like saving the information on my own PC but I may end up using the other program if this doesn't work. 
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Goldielocks

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Re: Do your owm taxes - Canada
« Reply #44 on: March 29, 2017, 02:28:34 PM »

2. My goal for this year as for RRSP deduction is to deduct just enough to bring in the lower tax bracket. According to TaxTips.ca, for 2016, the Combined Federal & Quebec Tax Brackets and Tax Rate is 28.53% up to 42,390$, which is what I'm shooting for.

The thing is, my total income for federal and provincial is different (because of some scolarships and other things).

For example :
Federal income : 45000$
Provincial income : 52000$

So I'm not too sure what RRSP amount I should deduct in order to bring me in the lower tax bracket... Should I aim for Federal or Provincial? Any other suggestion?

Thanks

IMO, 
1) aim for the $52k income level through RRSP's,  - claim them to drop your net income for 2016.
2) then Max out your TFSA,
3) then go back to the RRSP's (but do not claim these amounts this year, record them, but wait until future high income years of net income over $50k.)

My personal cut off is $60k, not $52k, as I believe I will be withdrawing the equivalent of $60k per year from my RRSPs (I don't have any company pensions).  Therefore, I don't want a lower tax credit now, to pay higher taxes in future.
« Last Edit: March 29, 2017, 02:30:45 PM by Goldielocks »

Prairie Stash

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Re: Do your owm taxes - Canada
« Reply #45 on: April 03, 2017, 11:46:27 AM »
I am going to be making more in 2017 and for sure want to keep deductions for next year(s) (I currently contributed more than want I will deduct).

I am just trying to figure how much exactly to deduct. As I said, my strategy is to deduct just enough in order to get me in the lower that bracket. But since my provincial and federal incomes have a substantial difference (around 15%), I not quite sure what to deduct.

Surely, I could try as long as the return/$ isn't as effective, but I'd prefer to understand how it works exactly.

Thanks!
Slow down the RRSP contributions.

If you want to keep it simple just invest in an taxable account. Pay capital gains tax at 18% on the money you earn, transfer the money, plus gains, into the RRSP (next year or later) and get 36% back (net 36-18=18% bonus). As opposed to getting 0% now when you invest in an RRSP and carry credits. If you carry over the money indefinitely it doesn't matter, the money just keeps growing. If its at a loss it stings a little but most of us will use the loss to offset a gain in the future, at that point the loss balances out.

The more complicated plan is to hedge the TFSA against the investment account.

You can transfer from the TFSA into the RRSP; so if you add $10K to the TFSA and it grows to $11K, then you transfer and get $11K worth of contributions! This strategy works well for stocks that have received capital gains and you don't want to pay tax.   

The second part of the strategy is to have a taxable account that you pay $0 taxes on. In Quebec the dividends are taxed at 5.64%, you can offset this by your RRSP contribution that receives refunds at 28.53%. Capital gains are only paid when you sell an ETF that's appreciated in value, if its at a loss when you sell you owe no taxes!!! Take a second to dwell on this, if you have an ETF inside your TFSA and in a taxable account you can sell at a loss and transfer the money into the RRSP or sell at a gain (the TFSA); either way you avoid taxes. Its a simple hedge, if stocks go up/down you have a good strategy. In practice the dividends will pay for the RRSP contribution, for example you get $300 in dividends, owe $15 in taxes, take the $300 and put it into RRSP's to get $90 back...net gain of $75. Meanwhile your RRSP credits gain you $0.

At this point you may probably think, what an idiot, why would I want a capital loss? Well capital losses carry forward and can be used to offset future capital gains, you will get the money back in the future. I've used losses before, they work out to be very beneficial, they make future gains tax free. The loss is only temporary...Please remember the RRSP or TFSA account could also lose money, however you can't claim losses on RRSP or TFSA accounts. Losses are always bad but if you have a loss its always best in an investment account outside your RRSP or TFSA to minimize the damage.

This plan allows you to reap rewards in a down market, holding extra cash in an RRSP does not help in a down market. It also allows you to reap rewards in an up market, in excess of making current RRSP contributions. In any event, one day you will max out the RRSP, the goal is to get there efficiently and patiently. There is no prize for rushing.

Canadian Ben

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Re: Do your owm taxes - Canada
« Reply #46 on: April 04, 2017, 04:54:55 AM »
Prairie stash:

Isn't that system biased to those who are already FIRE'd? Your taxable account will be taxed much higher during the employment part where you are already getting a large part of non-effective income from work.

(Not saying the system isn't extremely interesting, but asking if it is valid for those still working too)

Prairie Stash

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Re: Do your owm taxes - Canada
« Reply #47 on: April 04, 2017, 09:26:12 AM »
Prairie stash:

Isn't that system biased to those who are already FIRE'd? Your taxable account will be taxed much higher during the employment part where you are already getting a large part of non-effective income from work.

(Not saying the system isn't extremely interesting, but asking if it is valid for those still working too)
To help clear it up, what taxes are owed while working if I don't sell my ETF? I'll try to answer that question myself.

Its both province and income dependent. Lets take an Ontario resident, if they make $40,000 and get $5000 in dividends, the dividends are tax free for eligible ETF (Canadian stocks). If they sell the underlying stock at some point they'll pay capital gains, but if they transfer the gains into the RRSP the contribution deduction will cover the tax owed plus leave you with a refund. In essence you can make money from the transfer, ideally you contribute to RRSP at higher incomes which magnifies the strategy. Inside the TFSA you purchase American and World ETF, you can still achieve a balanced portfolio.

Obviously it gets more difficult at higher incomes (but we were discussing low incomes), but at that point its also easier to max out RRSP contributions. If I make $100,000 I get $18k in RRSP room, which isn't hard to max with that kind of income. At that point the argument is moot because you won't have the choice of RRSP/TFSA/investment account because the first 2 will be maxed and you only have the investment account left.

In an ETF buy/hold strategy a low income should never use an RRSP. Its always TFSA then investment account. For low incomes that don't trigger capital gains all the dividends are tax free (RRSP will force you to pay tax later) and the gains can be managed easier to avoid any future tax bills as well. In retirement if you sell a stock that's doubled from $20k (purchase price) to $40k its 100% tax free unless you have other income (you don't pay tax annually, just when you sell). Essentially low income individuals have almost unlimited TFSA room (unless you get a whopping inheritance), the tax can all be avoided with some planning. If you believe TFSA is better at low income then why isn't an investment account, with some planning, better? Please note this strategy fails if you buy/sell frequently and trigger gains regularly. They might have different names but you can make them both tax free.

Obviously it needs to be tailored to personal situations but that's the broad strokes. I've had a investment account for 10 years, last year I had to pay some taxes on the dividends but in my low income early days they were tax free. As long as I don't sell I can delay the gains tax indefinitely. I can rebalance my portfolio by buying/selling inside the TFSA/RRSP, all three accounts work in unison.

Canadian Ben

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Re: Do your owm taxes - Canada
« Reply #48 on: April 04, 2017, 08:34:54 PM »
Interesting. Thanks.

I've personally used the RRSP (higher income now than in the future) and used the refund to put in my taxable account, so it'll be the same taxation at some distant point in the future (or a little lower) but the different in taxation between income from RRSP and taxable ETF/dividends is huge.

max9505672

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Re: Do your owm taxes - Canada
« Reply #49 on: April 04, 2017, 09:18:30 PM »
Thanks for your answers.

@Prairie Stash, I read your posts several times, but I'm still not sure I understood everything. I usually understand better with concrete examples, so I thought I'd throw some numbers (close to my actual position) to see if I understood correctly.

First, in order to reduces variables, the following example would all follow the same strategy which is buy and hold ETF until retirement. At retirement time, it is expected that all the money withdrawn from RRSP will be at lower taxes bracket (under 43K$/year as for now). Any returns would also be reinvested. Finally, all the investment would be would of similar kind (similar AA) and yield be the same.

Ok, so let's say someone has that profile :
2016 earning : 50K$
TFSA contribution room : 0$ (full contribution achieved)
RRSP contribution room : 30K$
Money to invest : 15K$

How I see it, the person has 3 choices:

1. Contribute 15K$ to a RRSP. Deduct the whole 15K$ and get a 5K$ tax return. Then invest that 5K$ in taxable account or RRSP (not sure here). This would mean part of the deduction isn't ''optimal'' since it is deducted at the same tax bracket that it is going to be withdrawn in the future. Therefore, this would simply be tax differed.

2. Contribute 15K$ to a RRSP. Deduct 6K$ (minimum to get to the lower tax bracket) and get a 2K$ tax return. Then invest that 2K$ in taxable account or RRSP (not sure here). In that case, all the deduction is from a higher tax bracket. Therefore, instead of being taxed at 32.53%, this 6K$ will eventually get taxed at 28.53%. This can been seen a 4% gain. In the mean time, the remaining 9K$ that hasn't been deducted keeps growing and can be deducted in the following years in order to lower tax brackets.

3. Contribute 6K$ to a RRSP, deduct 6K$ (minimum to get to the lower tax bracket) and get a 2K$ tax return. Invest the remaining 9K$ in a taxable account. During that time, the dividends are taxed and you have the possibility, later on, to transfer to a RRSP.

I think what you suggest is choice #3. You're suggesting :

If you want to keep it simple just invest in an taxable account. Pay capital gains tax at 18% on the money you earn, transfer the money, plus gains, into the RRSP (next year or later) and get 36% back (net 36-18=18% bonus). As opposed to getting 0% now when you invest in an RRSP and carry credits. If you carry over the money indefinitely it doesn't matter, the money just keeps growing. If its at a loss it stings a little but most of us will use the loss to offset a gain in the future, at that point the loss balances out.
Not sure about the 18% and what you suggest here. In the case of option #3, what's the difference of investing 9K$ in taxable account or in RRSP? Why do you say 0% in RRSP, that 9K$ would still be growing even by the time it's not deducted. Yes, it'll get taxed when you withdraw in many years, but again the goal is that it gets taxed at the lowr bracket.. I am missing something here?

The second part of the strategy is to have a taxable account that you pay $0 taxes on. In Quebec the dividends are taxed at 5.64%, you can offset this by your RRSP contribution that receives refunds at 28.53%. Capital gains are only paid when you sell an ETF that's appreciated in value, if its at a loss when you sell you owe no taxes!!! Take a second to dwell on this, if you have an ETF inside your TFSA and in a taxable account you can sell at a loss and transfer the money into the RRSP or sell at a gain (the TFSA); either way you avoid taxes. Its a simple hedge, if stocks go up/down you have a good strategy. In practice the dividends will pay for the RRSP contribution, for example you get $300 in dividends, owe $15 in taxes, take the $300 and put it into RRSP's to get $90 back...net gain of $75. Meanwhile your RRSP credits gain you $0.

At this point you may probably think, what an idiot, why would I want a capital loss? Well capital losses carry forward and can be used to offset future capital gains, you will get the money back in the future. I've used losses before, they work out to be very beneficial, they make future gains tax free. The loss is only temporary...Please remember the RRSP or TFSA account could also lose money, however you can't claim losses on RRSP or TFSA accounts. Losses are always bad but if you have a loss its always best in an investment account outside your RRSP or TFSA to minimize the damage.

This plan allows you to reap rewards in a down market, holding extra cash in an RRSP does not help in a down market. It also allows you to reap rewards in an up market, in excess of making current RRSP contributions. In any event, one day you will max out the RRSP, the goal is to get there efficiently and patiently. There is no prize for rushing.
This part is very interesting, never thought of it. One more reason to go towards option #3.. That requires active accounts management though. So at the end of every year, you'd apply this strategy? Could you elaborate with a numerical example of what you'd do in a case of a up/down market for someone who have money (and free room) in all 3 account types?

In an ETF buy/hold strategy a low income should never use an RRSP. Its always TFSA then investment account. For low incomes that don't trigger capital gains all the dividends are tax free (RRSP will force you to pay tax later) and the gains can be managed easier to avoid any future tax bills as well. In retirement if you sell a stock that's doubled from $20k (purchase price) to $40k its 100% tax free unless you have other income (you don't pay tax annually, just when you sell). Essentially low income individuals have almost unlimited TFSA room (unless you get a whopping inheritance), the tax can all be avoided with some planning. If you believe TFSA is better at low income then why isn't an investment account, with some planning, better? Please note this strategy fails if you buy/sell frequently and trigger gains regularly. They might have different names but you can make them both tax free.
Can you explain the sentences in bold? Until what point it's considered ''low income'' where you can offset dividends taxes by moving to RRSP? I don't get the 20K$ doubling to 40K$ and being tax free.. Are you talking about TFSA?