Picture this: you're lounging in your comfiest PJs, sipping a cup of cocoa, and browsing through your online banking statement. Suddenly, you come across an unfamiliar transaction – the “Canada RIT Deposit.” Is it a secret gift from the Canadian government?
Nope, it's money they owe you. However, not all Canadians receive an RIT right away – or at all. Sometimes, you'll see it show up in your bank account on a random date, months after filing your income tax return. Due to showing up at random times, it's often called “surprise money”, and yes it's a great surprise to get. But what exactly is the Canada RIT deposit and how does it work? Here's what you need to know about this sometimes unexpected deposit from the Canada Revenue Agency.
- What is the Canada RIT Deposit?
- Reasons for getting a Canada RIT Deposit
- What if I didn't get a Notice of Reassessment?
- Who is eligible to receive Canada RIT Deposits?
- How can I receive my Canada RIT Deposit?
- When will I get my refund?
- My bank statement says Canada RIF, what does that mean?
- I received a Canada RIT Deposit, what should I do with it?
- Pay off high-interest debt
- Build an emergency fund
- Save for retirement
- Invest in your education or professional development
- Invest in a brighter future
- Contribute to your children's college fund
- FAQs about the Canada RIT Deposit
What is the Canada RIT Deposit?
The Canada RIT Deposit is the abbreviation of Canada Refind Income Tax Deposit. It's a bit of a mouthful, eh? If you received the funds right after filing your annual income tax return, then it's likely just a regular tax refund brought to you by the friendly folks at the Canada Revenue Agency (CRA) if you overpaid your income taxes during the tax year.
If you didn't recently file your income tax return, or you weren't expecting money for whatever reason, a Canada RIT Deposit can mean your taxes were reassessed. If the CRA did reassess your taxes, then you'll likely have received a Notice of Reassessment by mail or via your CRA account. It does not mean you're in trouble or being audited.
This overpayment can occur for various reasons, such as having too much tax withheld from your paychecks, being eligible for tax deductions or tax credits that were not applied during the year, or having unclaimed tax credits from previous years.
Reasons for getting a Canada RIT Deposit
Does it mean my taxes were reassessed?
Does it mean I’m in trouble?
Was the Canada RIT deposit a mistake from the CRA?
These are all valid questions. Surprise money is always nice, but it can be a little jarring if it comes from the government when you least expect it. If you received the funds unexpectedly, it can mean your taxes were reassessed. If the CRA did reassess your taxes, then you’ll likely have received a Notice of Reassessment by mail or via your CRA account.
Whatever the case, an RIT Deposit is cause for celebration. It does not mean you’re in trouble or being audited. There are several reasons why you may receive an RIT Deposit after filing your income tax return:
Employers are responsible for withholding income tax from your paycheques throughout the year. If they withhold too much, you may receive a Canada RIT Deposit after filing your income tax return.
You may qualify for tax deductions that reduce your taxable income, resulting in a lower income tax liability. If you did not claim these deductions during the year, you could receive an RIT Deposit.
Tax credits directly reduce the amount of tax you owe. If you qualify for tax credits that were not applied during the year, or if you have unclaimed tax credits from previous years, you may receive an RIT Deposit.
If you make tax instalment payments throughout the year and end up paying more than your actual tax liability, you may receive an RIT Deposit.
What if I didn't get a Notice of Reassessment?
Everyone makes mistakes, including Government Tax Officials. If you received a Canada RIT Deposit and have no idea why, it's a good idea to confirm it's legit.
Sign into your CRA My Account to look for a Notice of Reassessment. On the left menu panel, scroll down to “Correspondance” and click on Mail.” Set the correspondence type to “all” and search within the last 12 months or by a specific tax year. If you still can't find anything, it's time to call CRA.
Who is eligible to receive Canada RIT Deposits?
Any Canadian who files their taxes, as well as Canadian businesses who file taxes, can receive a Canada RIT Deposit. Unfortunately, not everyone will get it. To be eligible for an RIT Deposit, you must file a complete and accurate income tax return with the CRA.
There are many ways you can reduce your income tax owing and hopefully end up with a refund. Make sure that you report all your income, claim all eligible deductions and credits, and provide any supporting documentation required.
Once your income tax return is processed, the CRA will calculate your actual tax liability and compare it to the amount of tax you have already paid. If you have overpaid, the CRA will issue an RIT Deposit to refund the difference.
How can I receive my Canada RIT Deposit?
To receive your RIT Deposit, you can choose to have it directly deposited into your bank account or sent to you as a cheque by mail. It is generally faster to receive your refund through direct deposit.
To set up direct deposit, log into your MyCRA Account. From the left menu panel, click on “Profile.” Under your contact information, there should be a Direct Deposit option. Select “Edit” and enter your banking information.
When will I get my refund?
Canada RIT Deposits do not have any specific dates. When you receive it depends on when you file your income tax return and/or when your return is reassessed. However, you can expect to receive it during tax season shortly after filing your income taxes.
Tax season runs from February to June. Personal income taxes are typically due by April 30th. However, the 2023 filing deadline is actually May 1st because April 30th falls on a weekend. For self-employed people, your income tax returns are due by June 15th.
If you file your income taxes online, it could take up to 14 days or more to receive your Canada RIT deposit if you're owed money. Paper returns sent by mail can take over eight weeks to process and receive payment. And international tax filers can wait over 16 weeks for their tax refunds.
Additionally, the CRA might review your tax return later, potentially leading to extra refunds if discrepancies are found.
My bank statement says Canada RIF, what does that mean?
Don't panic, it's just another name for the RIT and means a refund or tax credit. Most of the time, the deposit will show up as “RIT/RIF” on your bank statement. It's still money owed to you in relation to your income tax return.
I received a Canada RIT Deposit, what should I do with it?
Using your Canada RIT Deposit wisely can provide long-term financial benefits and contribute to your overall financial stability. Consider your individual financial situation, goals, and priorities when deciding what to do with your windfall. Here are some suggestions on how to make the most of your RIT Deposit:
Pay off high-interest debt
If you have outstanding high-interest debt like credit card balances or payday loans, using your RIT Deposit to pay off or reduce these debts can save you a significant amount in interest charges over time. Prioritize debts with the highest interest rates to maximize your savings – a debt repayment strategy known as the Avalanche Method.
Build an emergency fund
An emergency fund provides a financial safety net for unexpected expenses, such as car repairs, medical bills, or a job loss. Consider using your RIT Deposit to start or add to an emergency fund, aiming for three to six months' worth of living expenses. A high-interest savings account is a great place for 911 money.
Save for retirement
Contributing your RIT Deposit to a Registered Retirement Savings Plan (RRSP) or a Tax-Free Savings Account (TFSA) can help you grow your retirement nest egg. Both accounts offer tax advantages, but the contribution limits and withdrawal rules vary, so choose the one that best suits your financial goals and needs.
Pro-tip: putting your Canada RIT Deposit in an RRSP account helps reduce your taxable income and could help your increase the size of your refund come the next filing season.
Invest in your education or professional development
Investing in your education or professional development can lead to increased earning potential and job opportunities. Use your RIT Deposit to enroll in a course, attend a conference, or obtain a professional certification that can boost your career prospects and your potential income.
Invest in a brighter future
If you have a major purchase or life goal in mind, such as buying a home, starting a business, or going on a dream vacation, use your RIT Deposit as a down payment or to kickstart your savings plan. For example, the new First Home Savings Account (FHSA) came into effect in April 2023 and can help you save for a home by reducing your income tax liability and allowing your investments to grow tax-free.
Contribute to your children's college fund
Consider using your RIT Deposit to contribute to a Registered Education Savings Plan (RESP) for your children's post-secondary education. This can help reduce the financial burden of tuition fees and related expenses when they attend college or university.
Support charitable causes
If you're passionate about a particular cause or charity, consider donating a portion of your RIT Deposit. Not only will you be contributing to a meaningful cause, but you may also be eligible for a charitable donation tax credit, which can reduce your tax liability in the following year.
FAQs about the Canada RIT Deposit
A Canada RIT transaction on your bank statement means “Return of Income Tax.” It means the CRA has processed your income tax return and deposited your refund directly into your bank account.
If you were not expecting money from the CRA, but a surprise RIT Deposit shows up in your account, it likely means your tax return was reassessed and revealed that the CRA owes you more money than originally calculated.
Most Canadian taxpayers who are owed a refund will receive a Canada RIT Deposit once a year in a lump sum. It is simply the moment your income tax refund is issued and directly deposited into your account. However, your income tax return could be reassessed at a later date. If new calculations reveal that the CRA underestimated your refund, you could receive another RIT Deposit later on when you're not expecting it.