Picture this: you’re lying in your comfiest pajamas, sipping cocoa, and looking at your bank statement online. Suddenly you come across an unknown transaction – “Canada RIT Deposit”. Is this a secret gift from the Canadian government?
No, it’s money they owe you. However, not all Canadians receive RIT immediately or at all. Sometimes you’ll see it show up in your bank account on a random date a few months after you file your tax return.
Because it comes out of the blue, it’s often called “surprise money,” and yes, it’s a nice surprise. But what exactly is Canada RIT deposit and how does it work? Here’s what you need to know about that sometimes unexpected payment from the Canada Revenue Agency.
What is the Canada RIT deposit?
Canada RIT Deposit is an abbreviation for Canada Refund Income Tax Deposit. That’s a bit of a mouthful, isn’t it? If you received funds right after filing your annual tax return, it’s most likely a regular tax refund delivered by friendly staff at the Canada Revenue Agency (CRA). In this case, it means that you overpaid income tax during the tax year.
Overpayment can occur for a variety of reasons. Too much tax may have been withheld from your paycheck. In other cases, you may be eligible for tax deductions or tax credits that were not applied during the year, or you may have unclaimed tax credits from previous years.
If you haven’t filed your tax return recently or weren’t expecting an unexpected benefit, making a Canada RIT deposit could mean your taxes have been assessed again. If the CRA has reassessed your taxes, you will likely receive a reassessment notice in the mail or through your CRA account. This doesn’t mean you’re in trouble or facing an audit.
Reasons for receiving a Canada RIT deposit
Does this mean my taxes have been assessed again?
Does this mean I’m in trouble?
Was the Canadian RIT deposit a CRA error?
These are all important questions. A cash surprise is always nice, but it can be a bit irritating if it comes when you least expect it. This doesn’t mean you’re in trouble or being controlled. There are several reasons why you may receive an RIT deposit after filing your tax return:
Excessive deduction
Employers are required to withhold income tax from your paychecks throughout the year. If they have retained too much, you may receive a Canada RIT deposit when you file your tax return.
Tax deductions
You may qualify for tax credits that reduce your taxable income, resulting in a lower income tax liability. If you haven’t taken these deductions during the year, you may receive a RIT deposit.
Tax breaks
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 a RIT deposit.
Tax installments
If you pay tax installments throughout the year and end up paying more than your actual tax liability, you may receive a RIT deposit.
What happens if I don’t receive a reassessment notification?
Everyone makes mistakes, including tax officials. If you received a Canada RIT deposit and have no idea why, it’s a good idea to confirm that it is legitimate.
Log in to your CRA My Account and look for your reassessment notification. In the left menu panel, scroll down to “Mailkeeping” and click 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 the CRA.
Who is eligible to receive Canada RIT deposits?
Any Canadian who files their taxes, as well as a Canadian company that files their taxes, can receive a Canada RIT deposit. Unfortunately, not everyone will succeed. To qualify for the RIT deposit, you must file a complete and accurate tax return with the CRA.
There are many ways to reduce the income tax you owe and hopefully get a refund. Make sure you report all your income, claim all eligible deductions and credits, and provide any supporting documentation required.
After reviewing your tax return, the CRA will calculate your actual tax liability and compare it to the amount of tax you have already paid. If you overpaid, the CRA will issue a RIT deposit to refund the difference.
How do I receive a Canada RIT deposit?
To receive your RIT deposit, you can choose to have it deposited directly into your bank account or have it mailed to you as a check. It’s usually faster to get your refund through direct deposit.
To set up direct deposit, log in to your MyCRA account. In the left menu panel, click “Profile”. There should be a Direct Deposit option under your contact information. Select “Edit” and enter your bank details.
When will I receive my refund?
Canada RIT deposits do not have specific dates. When you receive it depends on when you file your tax return and/or when your return is reassessed. However, you can expect to receive it shortly after filing your tax return.
Tax season runs from February to June. Personal income tax is usually due by April 30. If you are self-employed, you must submit your tax return by June 15.
If you file your tax return online, it may take up to 14 days to receive your Canada RIT payment, or longer if you owe money. Paper returns mailed in may take over eight weeks to process and receive payment. And people filing international tax returns may have to wait more than 16 weeks for their tax refund.
Additionally, the CRA may later review your tax return, which could result in additional refunds if discrepancies are discovered.
My bank statement says Canada RIF. What does it mean?
Don’t panic, it’s just another name for RIT and stands for Refund or Tax Credit. In most cases, the deposit will appear on your bank statement as “RIT/RIF”. This is still money owed to you on your tax return.
I received a Canada RIT deposit, what should I do with it?
Using your Canada RIT deposit wisely can provide financial relief and contribute to your overall financial stability. When deciding what to do with your windfall, consider your individual financial situation, goals and priorities. Here are some suggestions for getting the most out of your RIT deposit:
Pay off high-interest debt
If you have outstanding high-interest debt, such as credit card balances or payday loans, using an RIT deposit to pay off or reduce these debts can save you a significant amount in interest costs. Prioritize debts with the highest interest rates to maximize savings – a debt repayment strategy known as the Avalanche Method.
Build an emergency fund
An emergency fund provides financial security in the event of unexpected expenses such as car repairs, medical bills, or job loss. Consider using your RIT deposit to start or replenish an emergency fund equivalent to three to six months of living expenses. A high-interest savings account is a great place to put your 911 money.
Save for retirement
Contributing an RIT deposit to a Registered Retirement Savings Plan (RRSP) or Tax-Free Savings Account (TFSA) can help grow your retirement savings. Both accounts offer tax benefits, but deposit limits and withdrawal policies are different, so choose the one that best suits your financial goals and needs.
Pro tip: Placing a Canada RIT deposit in your RRSP account helps reduce your taxable income and may help increase your refund amount next filing season.
Invest in your education or professional development
Investing in education or professional development can lead to increased earning potential and employment opportunities. Use your RIT deposit to enroll in a course, attend a conference or obtain a professional certification that can increase your career prospects and income potential.
Invest in a better future
Perhaps you have a major purchase or life goal in mind, such as buying a home, starting a business, or going on a dream vacation. In this case, use your RIT deposit as a down payment or as a start to your savings plan. For example, the new First Home Savings Account (FHSA) went into effect in April 2023 and can help you save for a home by reducing your income tax liability and allowing you to grow your investments tax-free.
Online investing platforms like Questrade and Wealthsimple can make the most of your RIT deposit by offering commission-free trading and low-cost robo-advisors.
Support 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 and related expenses when attending college or university.
Support charitable causes
If you are passionate about a specific cause or charity, consider donating a portion of your deposit to RIT. Not only will you be supporting a good cause, but you may also qualify for the charitable donation tax credit, which could reduce your tax liability next year.
Canada RIT Deposit FAQs
What does Canadian RIT mean on my bank statement?
A Canada RIT transaction on your bank statement means that the CRA has processed your tax return and deposited your refund directly into your bank account.
What is a Canada RIT windfall deposit?
If you weren’t expecting money from the CRA but a surprise RIT deposit appears in your account, it likely means your tax return has been re-filed. As a result, the CRA owes you more money than they originally calculated.
How many times do you receive Canadian RIT?
Most Canadian taxpayers eligible for a refund will receive the Canada RIT deposit as a lump sum once a year. It reflects the moment when your income tax refund is received and credited directly to your account. However, your tax return may be re-filed at a later date. If new calculations show that the CRA underestimated your return, you may receive another RIT payment later when you don’t expect it.
