Attention Seniors

Seniors get more time to qualify for tax refund
April 02, 2009 James Daw
Attention seniors: Hold on to your tax returns, or get ready to file an adjustment form. You still have until April 14 to qualify for an extra refund of some of your 2008 income taxes.
Some effort will be required, including a trip to your bank or other financial company. But you could save hundreds of dollars, at least temporarily.
This one-time opportunity was promised in November by Finance Minister James Flaherty, but it did not receive final assent until March 12.
So, as Toronto Star reader Cecil King of Ajax points out, there may be seniors who did not see reports on Flaherty's announcement, or get good advice from their financial institution.
Flaherty promised to let holders of registered retirement income funds (RRIFs), life income funds (LIFs) and locked-in retirement income accounts (LRIFs) draw 25 per cent less income in 2008 than the minimum specified for their age.
Flaherty made the offer so people would have extra time to recover from last year's investment losses or simply spread their remaining savings over more years.
He added another promise in January to let beneficiaries waiting for a distribution from a registered account treat investment losses as though they occurred before the account holder's death.
For many seniors, the opportunity to draw less income in 2008 meant nothing because they needed and spent every dollar as it came in. In fact, some would have withdrawn more from their locked-in accounts if they could.
For others, the announcement came too late to scale back their withdrawals partly or fully. But Jamie Golombek of CIBC Private Wealth Management points out that putting money back in this year instead of taking less last year is not a bad thing, despite the inconvenience.
Minimum withdrawals for 2009 will be based, as usual, on the account balance as of Jan. 1. Those who took the required withdrawals in 2008 and can afford to put money back in 2009 will be able to shelter more money from tax longer. (Eventually, everything in a registered account will be withdrawn and taxed.)
Someone who was required to withdraw $10,000 in 2008 could contribute $2,500 to the same registered account or another one, and claim a tax rebate of $500 to $1,150 depending on their other income.
"To the extent they want to keep as much money in as possible in a tax-sheltered vehicle, (seniors) should make a contribution," says Gena Katz of Ernst & Young.
Provincial regulations will not permit someone to return money to a LIF or LRIF, the type of account used to hold money transferred directly from a pension plan. But they could contribute to another an existing RRIF account, or a newly opened account. Someone 71 or younger this year could open a registered retirement savings plan, and convert to a RRIF later.
Some seniors have complained they encountered confusion or resistance at financial institutions when they asked about reducing withdrawals or returning money to a registered account.
But Katz says financial institutions should be up to speed by now and ready to deal with contributions. The delay in passing enabling legislation resulted in seniors being given until Tuesday, April 14, instead of March 2 to contribute the equivalent of a quarter of last year's minimum withdrawal.
If you have already filed your 2008 tax return, you could still make your RRIF or RRSP contribution and file a T1 adjustment form, either right away or when you receive your assessment statement, says Katz.
James Daw, CFP, appears Tuesday, Thursday and Saturday. He can be reached at Business, 1 Yonge St., Toronto M5E 1E6; at 416-945-8633; 416-865-3630 by fax; or at jdaw@thestar.ca by email.