There is a bug in the processing of this credit in TC.
On the carry forward from Profile: TC does not carry forward the credit available at the end of last year.
The credit must be used to reduce taxes and the rest (purchased within 60 days of the year in Canada and throughout the year in Quebec) can be carried forward to the following year. However, TC still applies up to the maximum possible credit on lines 41300 and 41400 as well as TP1 line 424 even if the customer does not need it to reduce his taxes.
There is also a problem when the client does not repay withdrawals made under the HBP. TC must indicate on line 41800 a special tax but does not do so. TC does this at line 443 of TP1. maybe I don’t know how to do it.
I have not come across labour-sponsered funds. I would like to understand how this works. Could you elaborate?
Lines 41300 and 41400 – Labour-sponsored funds tax credit
What do you mean by a problem when a client does not repay withdrawals under HBP? In the case when the minimum required Home Buyers Plan annual repayment is not made and not claimed as a HBP repayment, then a T4RSP income slip is issued in the amount of the HBP repayment not made. Were you expecting something something different?
Q2… I have come across this as well… To the best that I can determine, It appears there was some taxpayers had a suspension of repayment of HBP during Covid Years…apparently it was optional to pay back and on the NOA of certain years it makes no indication of a repayment required.
Those that did not… the TC program is not picking up on this or the correct number when it resumes… as the amount to payback is slightly higher.
Any client that has HBP… I check via CRA Rep a Client, to access the NOA. If NOAs have indicated that no repayment was required; I check with client and follow their lead repay or not. If we choose NOT, then TC does not carry forward the correct info and I make a note to override based on the download from AFR.
Clear as mud??? Another Covid mess
Q1. Labour Sponsor Credit
I will let someone else explain this interesting tax credit…
yes, I always override based on best interest of the client, clients in New Brunswick and I play with tuition credits, charity, etc… as to not “Waste” this credit on non taxable income. It does not optimize correctly.
The workers’ fund gives a tax credit of 15% federal and 15% provincial (I live in Quebec). The maximum credit is $750 per government purchase of $5000 of funds. The taxpayer can buy RRSP funds and have the RRSP deduction as well.
If the taxpayer buys more than $5,000 in a year, the federal government allows the credit to be carried over to the following year for purchases made in January-February, while Quebec allows the deferral for purchases in the year that exceed $5,000.
If the client withdraws these funds (RRSP) under an HBP, he must purchase labor funds in the future to avoid the special tax of 15%. If he does not, he must add a special tax to line 41800.