[quote=“jmvca, post:1, topic:1143”]
I am a bit confused where to enter the above amounts. Looking at RPP worksheet in TaxCycle, I know that #3 amount of $705.60 to be entered in “1e” box. [/quote]
I am a little confused myself with your #3 of $705.60 entered in “1e” box. I don’t see that number anywhere on the worksheet.
In any event, I will attempt to give you some of my insight.
From the data you provided, it looks like you have most of the form completed properly. Box 1c looks ok, box 1e looks ok too (5,327.96). I’m not sure where the $705.60 from, I don’t see it anywhere in your numbers or on the form.
Line 2b is giving you a problem because you need to enter an amount on line 8. You need to know the number of years of pre-1990 service your client bought back. It may not be on any of the paperwork that you have, but the client should be able to obtain that (or it may be in your last years records). It is a little odd (although not impossible) to have an “undeducted amount” brought forward on line 4 plus a current pre-1990 buyback as it suggests the repurchase was completed over at least 2 years. Anyway, my point here, is that since you have an amount brought forward on line 4, someone must have already known the # of years of pre-1990 service, because the number would have been entered in 2015. You would have needed to know the number of years of pre-1990 service in 2015 in order to properly deduct the $3,500 maximum last year. Once you can get the number for line 8 the rest of the form should work itself out fine. Remember, a year includes a partial year, so if your client purchased some pension from November of 1988 to February of 1989 that 4 months counts as 2 years of service.
The reason why this is important is because before 1990 the maximum deduction for RPP contributions was limited to $3,500 per year… whereas nowadays the amount is unlimited. So for example if I had a client that paid 25000 to purchase 5 years of pre-1990 service the maximum amount I would ever be able to deduct would be 17,500 (5 years x 3500), with the difference of 7500 being non-deductible at all. Of course, you are limited to 3,500 per year so it will take 5 years to fully claim the amount.
Back to your case, the amount you are going to end up being able to deduct in 2016 is ** likely ** going to be $13,156.48 being the total amount of post 1989 buyback (9,656.48) and 3,500 of the pre-1990. You will likely have a carryforward of 2,470.98 that will show up on next year’s line 4, calculated as (5327.96+643.02-3500).
Hope this helps a bit.