Filing a tax return for students and starting an RRSP...

[Stephen06GT]

My daughter got her first T4 slip today. I believe she doesn't have to file a return because the monies she has earned is under the minimum amount. That being said, if she starts an RRSP and files a return would she get any of that contribution back in the form of a refund? Any pro and cons to filing a return even if you don't have to?

Thanks

[Uncle Buck]

I'm no expert but if she didn't pay any income tax, then there is nothing to be returned if she contributed to an RRSP.

That said, it's never too early to start an RRSP and a TFSA. I think there are minimum age requirements but don't know them off hand, possibly 18.

[RedSN]

If you receive a T4, I believe you have to file a return, regardless if you end up owing or not.
If she is below the tax threshold, no sense contributing to a registered RRSP to get the tax benefit. Better to invest in a GIC or something to save that college money. Wait until she owes taxes.

[Mellow Yellow]

Stephen, if there are absolutely no deductions (CPP and EI) she does not need to file. It also depends on her age. But to get the RRSP limits started she needs to file.
So if she earned $1,000 her RRSP limit would increase $180.

Let me know if you have any other questions.

[92redragtop]

If she received a T4 then she has earnings and should file a tax return - that will start the record for her RRSP limits which is a % of income (the limits are separate from her actual contributions which she does not have to make - in fact it's in her interest to delay contributions while building the contribution room while she is in a low tax bracket until she is in a higher tax bracket; she can contribute to a TFSA in the meantime while building her RRSP contribution room).

I assume she did pay tax on her earnings on the T4? If she is below the minimum amount/allowances then she should get those taxes back wouldn't she? That would only be available via the tax filing.

That said, I think the minimum age to open an RRSP or TFSA is 18 (I believe it's 18 for the TFSA so I assume it's the same for RRSP) so I'm not sure how that works with her RRSP contribution limit....but that doesn't affect her ability to file the return.

When my niece turned 18 I opened a TFSA with Questrade for her, funded the account and bought 100 shares of a stock for her to get her started. She's in 2nd year university now so I'll continue to add funds on birthdays, etc so more investments/stocks can be purchased, and she can learn about how investing works (or at least thinking about the future), discipline of saving/investing, and how market volatility works.

[Darkhorse]

I agree file anyway to build RSP contribution room. If she's underage may not qualify for HST return cheques but everyone should always file to get any credits or benefits they can, sometimes the credits can be transferred to the higher earning person in the household if you request and get approval from CRA.

[Stephen06GT]

Thanks for the input guys, much appreciated. We will definitely file a return and I will look into the other issues.