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RRSP Overcontribution - understanding warning and what to do if I've overcontributed


crystallee
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I'm getting a "Your RRSP contribution exceeds your deduction limit by more than $2,000." warning.  My understanding is that the Situation A should be ok (made-up numbers) since $12,000 < $19,000, but I get the warning, and then when I go to Step 3 > Federal, the amount listed for "20800 RRSP/PRPP deduction (schedule 7)" is the $10,000, not $19,000 as I expected.  Can someone help me understand what I'm missing / where I've gone wrong?

Situation A:

Available contribution room for 2020 from Notice of Assessment: $10,000

18% of 2020 employment income: 0.18*50,000 = 9,000

Total room available as of end of 2020 = $10,000 + 9,000 = $19,000

2020 RRSP contributions: $12,000

 

Also, what if the following situation is true, where I've accidentally contributed more than I have room for since $22,000 > $19,000 (and $22,000 > $10,000)?  I'm reading a bit online about it but am feeling confused about the order I'd need to do things in.  I have no issue with taking the money out of my RRSP and paying tax on it.

 

Situation B:

Available contribution room for 2020 from Notice of Assessment: $10,000

18% of 2020 employment income: 0.18*50,000 = 9,000

Total room available as of end of 2020 = $10,000 + 9,000 = $19,000

2020 RRSP contributions: $22,000

 

Thanks for any advice!

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Hi crystallee.

For Situation A.

The opening eligible RRSP room available is $10,000.

You contributed $12,000.

You have now overcontributed for year 2020 by $2,000.

At this point you calculate the eligibility for year 2021 based on your income for 2020. So that gives you $9,000 as you determined for the year 2021 eligibility. You will now subtract the $2,000 overcontibution and end up with an allowable contribution for year 2021 of $7,000. On your 2021 tax return if you contribute $7,000  you will have a deduction of $9,000. That comes from the 2020 overcontribution of 2k plus the 2021 contribution of 7k.

If you have overcontributed by more than 2k you need to file remove the excess using a specific process so you don't pay tax and don't lose future RRSP eligibility.

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  • 11 months later...

 

For TheTaxSmith:

"If you have overcontributed by more than 2k you need to file remove the excess using a specific process so you don't pay tax and don't lose future RRSP eligibility."

I have done this too accidently, by $9K discovered it when entering my 2021 taxes, in Feb 2022, and have withdrawn the over contribution money from my RRSP, but they withheld tax, so how do I put this all into Ufile when filing my 2021 taxes? (to get it to show I am back in compliance and recover the taxes held back that I have already paid on my overage - the overage never gets applied to reduce my taxable income so now am double taxed on the $9K.

 

 

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Hello Brett D.

You should not have withdrawn the RRSP, as you stated you did, in the method you did. Since you have withdrawn the amount and have had tax withheld you need to file a T746 form. Here is a link to an article by the Royal bank that can explain what you need to. Trust this helps.   https://ca.rbcwealthmanagement.com/documents/900937/1471861/RRSP+over-contributions.pdf/dff84f20-347d-4ad3-8fdf-f5d2d66de527#:~:text=If the CRA approves your,excess contribution from your RRSP.

 

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  • 1 month later...

I am getting an error message saying "your RRSP contribution exceeds your deduction limit", but I have checked a dozen times and the amount I contributed the first 60 days of 2022 matches 100% to what is on my Notice Of Assessement deduction limit. I even have a small amount of unused from previous tax years. Why is this happening? I believe is the difference between a small refund vs it showing a owe a small amount.

 

Eg. Assessment RRSP deduction limit = $5,000, Amount contributed to my own RRSP first 60 days of 2022 = $5,000 (not the actual n

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