What happens if I over contribute to my RRSP savings account?

An over-contribution of $2,000 to your RRSP is allowed. Anything beyond this amount is subject to at a penalty of 1% per month for the months during which the over contribution remains in your RRSP until withdrawal, or until your excess amount is rolled over into the new RRSP deduction limit for the following year.

Payment for penalties are due 90 days after the end of year in which the over contribution was made. 

The RRSP withdrawal will be reported in your income during the year of withdrawal. You must submit form T3012A to the CRA in order for the CRA to issue form T1-OVP to you.  Form T1-OVP outlines your tax owing due to the RRSP over contribution and allows you to withdraw your RRSP from the issuer without having to incur witholding tax of up to 30%.

If your RRSP contribution room is equal to or greater than the over contribution for the following year, you can claim a deduction by rolling over the excess contribution.

ABOUT THE AUTHOR

ALLAN MADAN

CA.CPA.CGA

Allan Madan is a CPA, CA and the founder of Madan Chartered Accountant Professional Corporation. Allan provides valuable tax planning, accounting and income tax preparation services in the Greater Toronto Area.

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