Setting up an RRSP

Scroll down and you should see two sections that you will be working with, Benefits and Deductions.  Note that Pay Types, Benefits and Deductions have separate lists for Arms-Length and Non-Arms-Length employees so you will need to add each item once for each list if it is required for both types of employee. We will start with Deductions.  Click Add.  Click Add new deduction.

AgExpert Accounting cannot adjust deductions at the source or reduce taxable income due to an RRSP contribution. Deductions are always calculated on the gross pay plus the taxable benefit. Employers have the option to manually reduce the deductions at the source, but they are not obligated to do so.  Employees will receive a tax form from the RRSP provider that they can use to reduce their taxable income when filing their income tax return.

Throughout this article, we will work with the following example: An employee’s gross wages are $2,000.00 and the employer and employee are each contributing $20.00 to an RRSP account for the employee. The software will calculate the taxes on $2,020.00. If the employer wished to have the taxes calculated on $1,980.00 instead, those calculations will need to be done manually using the CRA website.

Before we set up the payroll items, ensure that you have all the accounts set up in your Chart of accounts.  You will need a Liability account and an Expense account to complete the setup of the RRSP deduction with matching employer contribution.

1. Set up the deduction:

a) Go to Payroll > Employees > select the employee you wish to add the RRSP deduction and benefit to.

b) Scroll down and you should see two sections that you will be working with, Benefits and Deductions.  Note that Pay Types, Benefits and Deductions have separate lists for Arms-Length and Non-Arms-Length employees so you will need to add each item once for each list if it is required for both types of employee. We will start with Deductions.  Click Add.  Click Add new deduction.

c) Enter the Name of the deduction.

d) Set the Maximum annual contribution if appropriate.  When the YTD deduction total reaches this amount, the program will stop deducting any further amounts.

e) Leave “Include on T4 box?” blank.

f) Toggle ON, “Requires a remittance?” and set the remittance type, if necessary, click Add new remittance type to add a new remittance report to your list.

g) Select the Liability account that will accumulate the RRSP contributions for remittance to your service provider.

h) Since the example is matching the employee’s contributions at 100%, set the Employer rate to 1.0 and select the Expense account the employer contribution will be posted to.  Note that the Employer rate field is a ratio so 1.0 = 100%, 0.5 would be equal to a 50% match, 0.25 would be equal to a 25% match and so on.

i) Once finished, click Save and select the new deduction to add it to the employee.

j) Set the amount of the deduction to occur on each paycheque.  In the example, it is $20.00.

2. Set up the benefit:

a) Click Add. Click Add new benefit.

b) Enter the Name of the benefit.

c) Toggle Cash to the off position.

d) Toggle Taxable to the on position.

e) Select “40 – Other taxable allowances and benefits” in the Include on T4 box field.

f) Once you’re finished, click Save.

g) Set the amount of the benefit to be recorded for each paycheque.  In the example, it is $20.00.

h) Finally, click Save one final time to save your changes to the employee and then edit any additional employees to add the new deduction and new benefit to their profiles as appropriate.

Last updated on July 24, 2020 by FCC AgExpert