hey guys it's Adrian here the Canadian in a T-shirt and today I'll be breaking down a simple
trick with your rrsp to reduce your tax bill from each paycheck and put more money in your pocket
right away this life hack is really easy to do and I've been doing it for years but most Canadians
haven't even heard of it it's called the t1213 form basically instead of waiting a whole year to
receive your tax refund from the government you'll receive that money right away spread throughout
each paycheck that gives you more time to invest your money and let it grow in this video I'll go
over the benefits of using your rrsp with this t1213 form I'll show you exactly how to fill it
out and submit it and then I'll show you guys my personal example with my actual pay stubs to prove
that it works as always I include timestamps for each chapter so feel free to skip ahead make sure
you watch my rrsp explained videos to learn how the rrsp works the rules to follow tax deductions
withdrawals and how to invest in your rrsp but I'll give a super quick summary right now the rrsp
is a tax sheltered account designed to fund your retirement and it offers two main benefits one it
allows your Investments to grow tax-free which is very powerful and two it allows you to defer your
taxes for years or decades until retirement you're able to reduce the amount of taxes you pay now in
your high income years and pay a much smaller tax bill when you retire and are in a lower tax
bracket let's look at an example I'll be using my personal example throughout this video to keep it
simple and at the end I'll show you my pay stubs to see how it plays out let's say I make seventy
seven thousand dollars a year in Ontario that puts me in the second tax bracket for both Federal and
provincial taxes in this tax bracket my marginal tax rate is 29.65 percent that's how much I get
taxed on each additional dollar so if I got a thousand dollar bonus I would pay 29.65 or 296
dollars in taxes likewise if I reduce my taxable income by contributing to my rrsp I save 29.65 of
that so if I put in seven thousand dollars into my rrsp I save 29.65 of that for my tax bill that
saves me two thousand and seventy five dollars and fifty cents and I'll receive this money as
a tax refund and I get this money next April when I file my tax return that's great and that's what
most Canadians do they contribute to their rrsp throughout the year they continue to pay full
taxes from their paycheck and over a year later in April or May they receive a large check from
the government but there is a better way we're overpaying our taxes with each paycheck and we're
letting the government hold on to our money for a whole year with no benefit to us we're giving the
government an interest-free loan with our money and that's the benefit of the t1213 form this
form is the request to reduce tax deductions at source that means that we will reduce the taxes we
pay from each paycheck putting more money in our pocket right away so in my example I contribute
seven thousand dollars to my rrsp and instead of waiting a whole year to receive that two
thousand dollar tax refund I get an extra eighty dollars from each paycheck for the whole year it's
the same amount of money eighty dollars times 26 paychecks but I gained the benefit of time
that's my money so now I get to use it right away to invest in my tfsa or rrsp giving my money an
extra 12 months to grow otherwise the government holds on to it for a year and I get no benefit
with this form it's basically a promise I make to the government I'm saying I promise to contribute
seven thousand dollars to my rrsp this year so tax me at that lower taxable income again I'm just
using this seven thousand dollars in my example but you can enter any amount you want as long
as it's within your available rrsp contribution room and when you submit this form you can still
contribute more than seven thousand dollars to your rrsp if so you'll receive a regular tax
refund on the amount above the 7K you promised it just helps to plan ahead and if you know the
minimum amount you'll put into your rrsp this year then fill out this form to get your money sooner
now let's see how to fill out this form I'll include a link in the description box below but
you can download form t1213 from the CRA website it's a two-page form and it's easy to follow the
instructions but I'll go over to the important sections here first off enter the year at the top
so 2023 fill out your personal info and employers info and here you can request to reduce taxes on
both your salary and additional lump sums like a bonus most people don't know what their bonus will
be ahead of time so I just check off salary this form isn't just for the rrsp it's used to claim
any tax deductions that you normally claim when you file your tax return things like child care
expenses child support medical bill moving costs or working in another Province again instead of
waiting to claim these deductions at the end of the year you'll get these tax savings right away
but in this video I'm only talking about the rrsp since it benefits all Canadians so in line one we
entered the rrsp contribution we promised to make this year in my case it was seven thousand dollars
this is important do not include any rrsp or RPP contributions that your employer already deducts
from your paycheck that includes employer matching rrsp amounts don't include those contributions
because those tax deductions are already baked into your paycheck you can't claim them twice
so in my case this seven thousand dollar amount is what I manually put into my rrsp investing
account with questrade and be reasonable here you don't have to provide any evidence if you
put in a reasonable rrsp amount especially if you've been contributing to your rrsp for years
but if you promise to contribute fifty thousand dollars to your rrsp and you've never even made
a contribution before that's definitely a red flag and you'll need to show them some proof such as a
monthly rrsp contribution plan all of the other boxes are for other deductible expenses so fill
them out if they apply to you I only care about the rrsp here so on the second page we confirm
the final amount in box 12 and we sign note for box 13 if you know ahead of time what your net
business or net rental income will be for the year then enter it this will reduce your immediate tax
savings but you won't owe any taxes at the end of the year if you can't predict your future business
income that's fine enter zero but keep in mind you will owe business taxes at the end of the
year and you might have to start paying quarterly taxes depending on your situation now just sign
the document and mail it to the address listed here it will take them four to six weeks to Pro
process and then they will send you their approval letter here's what it looks like all you have to
do now is give this form to your HR department or whoever handles your payroll and they will
adjust your paychecks effective immediately on the second page they give instructions for your
payroll don't worry about that payroll will handle that but you will see confirmation that my seven
thousand dollar RSP contribution is accepted and that's it it's a really easy process but I have
to submit this form every year since it takes up to six weeks to process they suggest mailing the
t1213 form by November 1st that will ensure that your payroll will be adjusted as soon as the New
Year hits in my case I was late by a few days I only got approved on January 5th 2020 so my
first paycheck was fully taxed and then the rest of my paychecks were taxed lower let's take a look
I already made a whole video on how to read a pay stub in Canada and what all these payroll
deductions look like I even used this exact pay stub as an exam people so check that out since
I was late with my t1213 form this first paycheck was taxed fully so notice my tax deduction was 609
dollars and six cents and my overall net pay was two thousand and two dollars and 10 cents now two
weeks later my t1213 was processed and I handed my approval to HR let's see the change as expected
the only thing that changed was the tax deducted my salary was the same CPP EI taxable benefits
all unchanged the only difference is that my tax deduction reduced by 84.66 and so my net pay was
increased by 84.66 that means that I get an extra eighty four dollars in my pocket every two weeks
for the rest of the year to me that's much better than letting the government hold on to my money
and pay me a lump sum of two thousand dollars a year from now let's go through the math to make
sure it all checks out remember I had a salary of seventy seven thousand dollars in Ontario which
puts me in the second tax bracket of 29.65 percent so contributing seven thousand dollars to my rrsp
would save me two thousand and seventy five dollars in taxes for the year normally we would
split this up by 26 paychecks but in my case I was late and I missed the first paycheck so we
divide by tax refund by 25 paychecks giving us 83 dollars in tax savings my actual tax savings were
eighty four dollars and that's because this form was processed between pay periods so it was off
by a few days but I hope you get the point all I had to do was plan ahead and commit to an rrsp
amount to contribute then it took me two minutes to fill out a form and mail it to the government
once I received their approval I just dropped it off at HR and there you go I just bumped
up my take-home pay by eighty four dollars every two weeks it's so easy and now I can invest that
money and put it to work right away and just as a reminder the rrsp deadline is coming up on March
1st that means that if you contribute to your rrsp before March 1st you'll be able to claim that tax
deduction for last year's income meaning you'll earn yourself a tax refund in just a few months
and the deadline to file your tax return this year is May 1st so check out my tutorial on how to file
your own taxes in Canada as well as the rest of my Canadian tax guide my videos with the silver
thumbnails thanks for watching guys and be sure to like comment and subscribe if you found this
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everyone and I'll see you guys on the next episode of the Canadian in a t-shirt bye guys