By Roger Pierce, Small Business Expert

This time of year can be financially stressful.

The months of January and February catch many Canadians struggling to pay off their holidays bills, while at the same time fretting about taxes due in April.

As a result it’s sometimes tempting to pass on the deadline to make a contribution to a Registered Retirement Savings Plan (RRSP).

Business owners in particular may regret that decision.

Entrepreneurs benefit from RRSP contributions in several ways. You’ll lower the amount of tax payable because RRSP contributions will reduce your taxable income. The income earned is not taxed until withdrawn. And, depending on the type of investment within the RRSP, you can redeem them if you decide you really need the money. (It’s best to speak first with qualified tax specialist to assess the financial consequences of such an action.)

Perhaps the most compelling reason to make the deadline is wealth diversification.

It’s simply comforting to accumulate some personal wealth away from your business. Personal savings and investments are healthy because they force you to force your business to pay you along the way. And, you likely deserve some financial rewards while working so tirelessly to build your enterprise.

Bottom line? An RRSP can reduce your business and personal risk.

In case you’re wondering, the RRSP contribution deadline for the 2011 taxation year is Wednesday, February 29, 2012. There’s still some time to act.

The maximum contribution amount for 2011 is 18% of your earned income, up to $22,450. If you did not maximize your RRSP contributions in previous years those unused amounts may be carried forward to allow you to contribute more than $22,450 for 2011.

And, to help you plan for next year, note the maximum RRSP deduction limit for 2012 will increase to $22,970.

To generate the best solutions for your particular tax situation, always consult with a tax specialist. And, contact your Scotiabank Small Business advisor to help make the deadline. He or she can help you to find a way to contribute – stress free, and on time.
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Do you find RRSP season stressful? Are RRSP investments important to your long-term goals? Please share your comments below with other business owners.