Personal Finance

Accidentally overcontributed to RRSP

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  • Feb 27th, 2010 11:41 am
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[OP]
Newbie
Dec 10, 2008
74 posts
33 upvotes

Accidentally overcontributed to RRSP

I opened a TD e-series RSP account this year and made an initial deposit of $3500 (my contribution limit), which went into a money market fund. I was planning to convert that into e-series bonds and index funds but accidentally purchased NEW funds instead. So now I have $3500 + $3500 in my RSP.

I am new to the whole RSP thing and I am not sure what to do now.
10 replies
Member
Oct 19, 2004
405 posts
17 upvotes
You can declare only $3500 RRSP (your limit) for 2009, and declare the rest for the following years.
Deal Addict
Feb 9, 2005
4169 posts
16 upvotes
Autumne wrote:
Feb 26th, 2010 12:13 pm
I opened a TD e-series RSP account this year and made an initial deposit of $3500 (my contribution limit), which went into a money market fund. I was planning to convert that into e-series bonds and index funds but accidentally purchased NEW funds instead. So now I have $3500 + $3500 in my RSP.

I am new to the whole RSP thing and I am not sure what to do now.
If you earned over $8333.33 in 2009 and made the extra $3500 contribution in 2010 you're probably fine because you can use the contribution for either 2009 or 2010 tax year. (BTW, the $8333.33 is because 18% of $8333.33 is $1500 plus you're allowed to overcontribute by $2000 without penalty = $3500 "overcontribution").

If you want to get the money back out, you may be able to correct the mistake.
Sr. Member
Nov 1, 2004
766 posts
26 upvotes
You can over flow by 2k, for the rest, you need to fill out a form to back out.

It's fairly easy to do, just call CRA, they will tell you how to do it.
[OP]
Newbie
Dec 10, 2008
74 posts
33 upvotes
So if I declare only $3500 for 2009, I won't be taxed on the other $3500? Just want to clarify.
Deal Addict
User avatar
Nov 28, 2007
1387 posts
472 upvotes
Autumne wrote:
Feb 26th, 2010 3:20 pm
So if I declare only $3500 for 2009, I won't be taxed on the other $3500? Just want to clarify.
The rumour is this....If you over contribute by more than $2000.00 (i.e. limit is $1000, you put in anything more than $3000) the government will most likely ignore it...In the years to follow you will claim the RSP contributions and as long as you don't keep over contributing you will be fine.

I see an issue with people using the HBP, they are going to slam $20000 in, some that may very well be overcontribution. They then have government forms all indicating they pulled out $20,000.00 when they only had $10,000 in room....Either they bought ford shares last year or they massively over contributed. Ultimate question is did they unfairly benefit from this situation????

The RSP is a tax shelter...If you make large amounts of money off over contributions you are avoiding taxes, the government will want your money. If you simply use it to buy a house the gain is what? Nothing that I can think of...

Keep in mind %18 of income is the limit - plan for that
[OP]
Newbie
Dec 10, 2008
74 posts
33 upvotes
So I should just leave the $3500 in my RSP account.

And it's okay to convert the money market fund into bonds and index funds? Sorry I'm totally new at this. Btw I don't plan on withdrawing the money anytime soon.
Deal Addict
User avatar
Mar 18, 2004
2772 posts
53 upvotes
No cash counts as over contribution.

You should contact your bank's RRSP department and reverse the transaction immediately. I've done this before and they were able to reverse it even 5 days after the transaction.
Member
May 31, 2005
484 posts
31 upvotes
If you over contribute and want to take it back out, you can just withdraw it. As long as you didn't use it as a deduction. (I'm guessing that TD already sent you the RRSP contribution slip saying you contributed $7000)
They will withhold 20% (by law they have too).
But, then you can claim it back on your tax return next year.
I can't remember the exact form number I used to claim it back.
It happened to me in 2008. To avoid the penalties, I withdrew it.
But, I had to call Revcan and they'll tell you which form to fill out. I no problems with the filing. The withdrawal you make will add $3500 to your earned income this year as TD will send you a slip next Feb, but next tax return you file will deduct it back later as well the tax that was withheld.

The only thing you will lose out on is the money for tax withheld until you file your taxes.
Deal Addict
May 13, 2005
3328 posts
3156 upvotes
Montreal
http://www.redflagdeals.com/forums/rrsp ... on-859809/
http://www.redflagdeals.com/forums/rrsp ... ct-707226/

I think you didn't overcontribute...

Think about this...

2009, you have room for $3500
2010, you have room for another $3500

You contribute $7000 in 2010 (early 60 days)...

You can deduct $3500 for 2009 and $3500 for 2010...


If you contribute $7000 in 2009 then you're subject to have 1% per month penalty
Deal Addict
Jun 11, 2005
2600 posts
285 upvotes
any007 wrote:
Feb 26th, 2010 6:46 pm
If you over contribute and want to take it back out, you can just withdraw it. As long as you didn't use it as a deduction. (I'm guessing that TD already sent you the RRSP contribution slip saying you contributed $7000)
They will withhold 20% (by law they have too).
But, then you can claim it back on your tax return next year.
I can't remember the exact form number I used to claim it back.
It happened to me in 2008. To avoid the penalties, I withdrew it.
But, I had to call Revcan and they'll tell you which form to fill out. I no problems with the filing. The withdrawal you make will add $3500 to your earned income this year as TD will send you a slip next Feb, but next tax return you file will deduct it back later as well the tax that was withheld.

The only thing you will lose out on is the money for tax withheld until you file your taxes.
This works well for "one-time errors"... otherwise the overcontribution and subsequent withdrawal may be regarded as failing the objective requirement of "not making the contributions intending to later withdraw them".

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