Personal Finance

RRSP over contribution

  • Last Updated:
  • Apr 20th, 2021 8:41 pm
[OP]
Deal Guru
Dec 5, 2006
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Markham

RRSP over contribution

Just found out over contributed around 6000 lol. I purchased in February. Could I simply withdraw 6000? Do I need fill in any form and send to CRA?

Thanks
31 replies
Deal Addict
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Nov 18, 2007
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Valleywood
If you have sufficient income this year and your $6000 is less than your contribution room for 2021, then no need to worry. Also, you can overcontribute by $2000 and not get penalized. So if you only have contribution room of $4000 for 2021, you will still be onside for 2021.

[Correction: If your income for 2020 is going to give additional RRSP contribution room of at least $4000, then there is no problem.]
Last edited by fastlayne on Apr 1st, 2021 8:40 pm, edited 1 time in total.
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Mar 22, 2018
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That's a bit of a mess you got yourself into. No, you can't just withdraw - you have paperwork ahead of you.

Contact your bank immediately and see if they can reverse the transaction as an error.

CRA Info - Link
Last edited by funtastic on Apr 1st, 2021 8:35 pm, edited 1 time in total.
[OP]
Deal Guru
Dec 5, 2006
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Markham
fastlayne wrote: If you have sufficient income this year and your $6000 is less than your contribution room for 2021, then no need to worry. Also, you can overcontribute by $2000 and not get penalized. So if you only have contribution room of $4000 for 2021, you will still be onside for 2021.
Didn't cra charge 1% each month on over contribution? Also I thought the room is against 2020?

Thanks
[OP]
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funtastic wrote:
Contact your bank immediately and see if they can reverse the transaction as an error.
I think that will create additional mess lol
Deal Addict
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Valleywood
Anything contributed in the first 60 days of the year can be used for 2020 or 2021.
[OP]
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fastlayne wrote: Anything contributed in the first 60 days of the year can be used for 2020 or 2021.
So do nothing? Just reduced 6000 from rsp when i file tax(eg I remove 6000 from tax deductions, therefore i pay tax on 6000)?
Member
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Mar 22, 2018
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Just phone CRA and explain situation and ask them what to do. That's your best option. You're literally paying them to help you.

Heads up, it'll be about a 2 hour call with wait times.
Deal Addict
Mar 3, 2018
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GTA
smartie wrote: So do nothing? Just reduced 6000 from rsp when i file tax(eg I remove 6000 from tax deductions, therefore i pay tax on 6000)?
The deduction is just deferred until the 2021 tax return. Report it on the 2020 tax return (first 60 days of 2021 line) as a contribution but don't claim the deduction in 2020. If you have no room in 2020 the deduction wouldn't be allowed anyways. The deduction is carried forward.
[OP]
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DaveTheDude wrote: The deduction is just deferred until the 2021 tax return. Report it on the 2020 tax return (first 60 days of 2021 line) as a contribution but don't claim the deduction in 2020. If you have no room in 2020 the deduction wouldn't be allowed anyways. The deduction is carried forward.
Ok thanks. It seems to me that only apply for 2000 over contribution?

So do i need fill in any form to cra? Eg T1-OVP?
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smartie wrote: So do nothing? Just reduced 6000 from rsp when i file tax(eg I remove 6000 from tax deductions, therefore i pay tax on 6000)?
Claim as much of the $6000 for 2020 as you can (plus $2000). Use the remainder for 2021. (You must report all contributions as per slips received, but you only need to claim the amount that will not put you into overcontribution.)
[OP]
Deal Guru
Dec 5, 2006
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fastlayne wrote: Claim as much of the $6000 for 2020 as you can (plus $2000). Use the remainder for 2021. (You must report all contributions as per slips received, but you only need to claim the amount that will not put you into overcontribution.)
Thanks. Feel better

Just confirm: I don't need withdraw 6000 and I don't need fill in any form, right?
Deal Addict
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smartie wrote: Ok thanks. It seems to me that only apply for 2000 over contribution?

So do i need fill in any form to cra? Eg T1-OVP?
No form is required because you will not have over contributed. Assuming you will have $4K of new RRSP contribution room available in 2021. Your tax software should reveal that on doing the 2020 tax return.
[OP]
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fastlayne wrote: Claim as much of the $6000 for 2020 as you can (plus $2000). Use the remainder for 2021. (You must report all contributions as per slips received, but you only need to claim the amount that will not put you into overcontribution.)
DaveTheDude wrote: No form is required because you will not have over contributed. Assuming you will have $4K of new RRSP contribution room available in 2021. Your tax software should reveal that on doing the 2020 tax return.
Thanks!
Deal Fanatic
Jul 1, 2007
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What's really going to happen is that you'll get your 2020 notice of assessment (online) after filing your taxes and it will probably say something like:

New RRSP contribution room earned based on 2020 income: $10,000 (A)
Unused RRSP contribution from a prior year: $6000 (B)

If B is higher than A you may have over-contributed.

I didn't check exactly what it says, but something along those lines. So basically if you earned $10K of contribution room for 2021 based on your 2020 income, and your over-contribution was $6000 then they balance out.

Had you made the over-contribution in December, you'd likely owe 1% x $4000 (the excess minus $2000). Twice that if it was done in November... etc.
Money Smarts Blog wrote: I agree with the previous posters, especially Thalo. {And} Thalo's advice is spot on.
[OP]
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Dec 5, 2006
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Thalo wrote: What's really going to happen is that you'll get your 2020 notice of assessment (online) after filing your taxes and it will probably say something like:

New RRSP contribution room earned based on 2020 income: $10,000 (A)
Unused RRSP contribution from a prior year: $6000 (B)

If B is higher than A you may have over-contributed.

I didn't check exactly what it says, but something along those lines. So basically if you earned $10K of contribution room for 2021 based on your 2020 income, and your over-contribution was $6000 then they balance out.

Had you made the over-contribution in December, you'd likely owe 1% x $4000 (the excess minus $2000). Twice that if it was done in November... etc.
Thanks for taking your time to answer it

I guess one thing i am confusing now is the RRSP number i am seeing in CRA is based on 2019 income plus unused room, is this correct? So as far as my 6000 is below my 2020 income *18%, then I should be fine? Is this correct?

Thanks
Deal Addict
Oct 24, 2010
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smartie wrote: Thanks for taking your time to answer it

I guess one thing i am confusing now is the RRSP number i am seeing in CRA is based on 2019 income plus unused room, is this correct? So as far as my 6000 is below my 2020 income *18%, then I should be fine? Is this correct?

Thanks
Yes.
Deal Addict
Sep 14, 2012
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Montreal, QC
smartie wrote: Thanks for taking your time to answer it

I guess one thing i am confusing now is the RRSP number i am seeing in CRA is based on 2019 income plus unused room, is this correct? So as far as my 6000 is below my 2020 income *18%, then I should be fine? Is this correct?

Thanks
Yes, as long as where you work, you don't have a company pension plan since this (pension adjustment) amount will reduce your RRSP contribution limit.
[OP]
Deal Guru
Dec 5, 2006
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lmcjipo wrote: Yes, as long as where you work, you don't have a company pension plan since this (pension adjustment) amount will reduce your RRSP contribution limit.
Thanks

How come you know all credit card and personal finance lol
Deal Addict
Sep 14, 2012
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smartie wrote: Thanks

How come you know all credit card and personal finance lol
I know about credit cards from having/using them since my early twenties as well as reading RedFlagDeals on new credit card products. For example, I would never have known that Canadians were eligible for a TD Bank NA Visa without RedFlagDeals and would have continued to use my TD Canada Trust US dollar Visa which offers no points and very limited benefits.

In terms of personal finance, I studied this part-time at the same time as I was going to university thinking that I might become a financial planner/advisor but in the end, for personal reasons, my career choice dealt with my university studies (computers) for a career in IT. However, I still like to keep myself informed about the changes in personal finance (since when I took my personal finance/investing course(s), there was no such thing as TFSA).

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