Why read this?
- You have an RRSP
- Youve exceeded your contribution limit
Whats an overcontribution?
If you have undeducted RRSP contributions exceeding
your deduction limit by more than $2,000, youve
What to do
STEP ONE: Decide whether or not to withdraw
Canada Revenue Agency (CRA) may penalize overcontributions
above the $2,000 cushion by 1% of the excess
amount per month, but you arent obligated
to withdraw the money, says Sandy Kirkwood-Pearce,
owner and president of Sleegers Kirkwood-Pearce.
If the investment is doing really well,
the consequences of the overpayment penalty
] might be overshadowed, she says.
STEP TWO: If you decide to remove the
money, ask CRA to waive withholding tax.
- Use Part 1 of Form
T3012A Tax Deduction Waiver on the Refund
of your Unused RRSP, PRPP, SPP, or RRIF Contributions
made in ___ (year) to calculate the amount
the RRSP administrator can refund without
- Under Part 2, designate which RRSP to withdraw
the money from, and a destination account.
- Attach proof of the overcontributions, such
as certified copies of receipts, and send
four copies of the form to CRA.
- If CRA approves, it will return three signed
copies of the form.
- Send the copies to your financial institution.
- Once the withdrawal is done, the institution
will return two copies.
TIP: Filling out the T3012 may not be
worth the time, or the accountants fees,
if theres little tax to be withheld, says
Karen Slezak, a tax partner at Crowe Soberman
LLP. Withdraw the overcontribution and
dont worry that there will be some withholding
tax, she says. The tax withheld will count
toward your annual tax return. Take the money
out in batches under $5,000 to minimize withholding
tax, Slezak adds.
STEP THREE: Ask CRA to waive the 1%
monthly excess contribution tax.
- CRA may approve your request, if:
- your excess contributions arose due to
a reasonable error; and
- youre withdrawing, or have withdrawn,
the excess contributions.
- To make a request fill out Form
RC4288 Request for Taxpayer Relief Cancel
or Waive Penalties or Interest or write
to CRA explaining:
i. why the error was made, and why its
ii. any steps youve taken to eliminate
the excess contributions. Include copies of
supporting documents, such as RRSP statements,
that show you have withdrawn the excess funds,
and any correspondence related to the error.
STEP FOUR: If CRA assesses the unused
contribution room as a negative amount, you
received gift money in your RRSP or you contributed
money to your partners RRSP without claiming
a tax deduction, you may have to submit Form
T1-OVP Individual Tax Return for RRSP Excess
- Determine whether you should submit the
form with CRAs
- If necessary, complete Form T1-OVP.
- Send CRA the form and outstanding tax.
WARNING: Payment is due 90 days after the end
of the tax year. Starting on day 91, CRA charges
compound daily interest on unpaid tax or penalties,
a late filing penalty of 5% of the balance owing,
and 1% of the balance for every month a return
STEP 5: Complete your annual
- If you paid withholding tax:
- Fill out form T746
Calculating Your Deduction for Refund
of Unused RRSP Contributions.
i. Enter the amount on Line 11 of the T746
on Line 232 of the return.
TIP: Complete a separate T476 for each
year of overcontributions.
- Write the amount in Box 20 of your T4RSP
Statement of RRSP Income slip on Line
129 of the return.
- Submit the T746 and T4RSP with your return.
- If you didnt pay withholding tax and
have already filed the T1-OVP, complete your
return as usual, says Kirkwood-Pearce.
Courtesy of fromyouradvisor.com
© 2015 Rogers Publishing.
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