RRSP overcontribution - how to resolve?

stanleyinfrared wrote: ↑ Dear RFDers,

Have any of you had to resolve overcontributions to your RRSPs? I would be grateful if you could share your experiences.

Here is what happened:

1) I contributed amount X$ that was within my RRSP contribution room for 2019 + 2000$ buffer in early 2019.
2) Later, I realized that I still have some room so I made an additional contribution (December 2019). I figured out that I made an error in my calculations (I misunderstood the way the employer DPSP afffects the RRSP contribution room). As a result, the total RRSP contribution for 2019 exceeds the available contribution room by ~2000$. I haven't filed my taxes for 2019 yet.

What would be my best course of action? As far as I understand, I can do the following:

1) Immediately withdraw the excess amount from the account. Write a letter to CRA and ask to waive the 1% penalty.

Is there anything else I can do? Can I simply report I made these contributions but do not use usem for current year's deductions?

cgtlky wrote: ↑ You can make a one time over contribution of $2000. I am not sure if you have use it before.

don242 wrote: ↑ Don't bother withdrawing it if you are going to have income in 2020. As of Jan 1, whatever is over contributed in 2019 can just go towards 2020 contributions (assuming you gain enough room for 2020 to cover it). Just make sure you have this understood for 2020 calculations.

At this point you are on the hook for the penalty. Luckily it was just one month, so as mentioned above, be sure to fill out the T1-OVP-S so it is made clear that you were only over one month.

That said, your DPSP is a pension adjustment. Pension adjustments affect your contribution limit for the following year. Is this the first year you have been getting the employer DPSP? Your NOA from your 2018 taxes will indicate your 2019 contribution room. I say this because you can contribute to your RRSP up to the amount of the contribution room indicated on your NOA. The DPSP is already factored into that for the 2019 amount (based on the 2018 pension adjustment). Any DPSP contributions made in 2019 will show as a pension adjustment on your 2019 tax return affecting your 2020 limit.

stanleyinfrared wrote: ↑ I did have income in 2019 and will hopefully continue having it in 2020 . 2019 is NOT the first year I have been getting DPSP from the employer.

This is my understanding of how things work. Your previous year's income determine your next year's RRSP room. This room is reduced by employer's DPSP contributions. So, in order to calculate the room I could have used myself in 2019, I need to subtract out the employer's 2019 DPSP contributions from the 2019 RRSP room as calculated by the CRA and shown in the user's CRA profile. In the beginning of the new year it is not possible to figure out what the total DPSP will be by the end of the year. One have to make estimates based on current contributions.

That being said, seems like I misunderstood the way things work. My RRSP available contribution is already net of DPSP contributions. Whatever is shown in the available room is what an individual can use independently of any DPSPs (i.e., without having to adjust for/subract out DPSP). Is this correct?

stanleyinfrared wrote: ↑ I did have income in 2019 and will hopefully continue having it in 2020 . 2019 is NOT the first year I have been getting DPSP from the employer.

This is my understanding of how things work. Your previous year's income determine your next year's RRSP room. This room is reduced by employer's DPSP contributions. So, in order to calculate the room I could have used myself in 2019, I need to subtract out the employer's 2019 DPSP contributions from the 2019 RRSP room as calculated by the CRA and shown in the user's CRA profile. In the beginning of the new year it is not possible to figure out what the total DPSP will be by the end of the year. One have to make estimates based on current contributions.

That being said, seems like I misunderstood the way things work. My RRSP available contribution is already net of DPSP contributions. Whatever is shown in the available room is what an individual can use independently of any DPSPs (i.e., without having to adjust for/subract out DPSP). Is this correct?