RRSP Over-Contribution on First 60 Days

[waynewyl]

Hi all, quick question in regards to how much RRSP I can contribute on the first 60 days.

Say in my 2019 NOA it shows that I have RRSP room of $20,000, and I completed the following transactions:

1. June 2020 - contributed $15,000 into RRSP

2. Feb 2021 - contributed $13,000 into RRSP

Did I over-contributed?

My initial thought is no, because I can choose not to apply the $13,000 that I contributed in Feb 2021 (with first 60 days for 2021) for my 2020 Tax Return, and that I anticipate I'll have another $20,000 room for 2021.

However, UFile keep saying I over-contributed and would result in penalty (even if I only choose to apply $1 as RRSP deduction for 2020).

Thoughts?

Thanks, Wayne 

[TheTaxSmith]

Hello waynewyl.

The February 2021 contribution can be allocated to 2020 or 2021, so no issues. Basically you have "unused contributions" of $8,000 (15K + 13K - 20K).

You can decide to limit the claim for 2020 but make sure you will have sufficient contribution room for 2020 to absorb any unused amount in excess of $2,000.

Ufile is providing a warning only that you should be aware of the situation of an overcontribution.

 

 

[waynewyl]

Thanks a lot for the reply. 

What worries me is UFile's warning language is so certain that I over-contributed (something along the lines of "CRA will assess a penalty" ).

[TheTaxSmith]

Hi waynewyl.

Go over the input area for the RRSP and make sure you have placed the amounts in the correct boxes. I always have an overcontribution, but Ufile just lets me know that I can not deduct all I have contributed. 

[waynewyl]

Here are my entries:

$20,000 for "RRSP/PRPP deduction limit for 2020 (2019 assessment)"

$15,000 for ""March to December 2020"

$13,000 for First 60 days of 2021"

and then doesn't matter what $ I put in "RRSP or PRPP/VSSP deduction to use in 2020", I would get this message "The government will assess monthly penalties of 1% on your overcontribution"

 

 

[TheTaxSmith]

It might be due to an $8K over contribution that is more than an allowable carry over of $2k. Basically the $8k overcontribution is fine unless it moves into the subsequent year without being applied as its over the $2k allowable overcontribution.

I suspect its just the wording used by Ufile to warn you, but I can understand your concern. Perhaps Nawal can elaborate on that wording?

 

 

[waynewyl]

 

Thanks @TheTaxSmith, appreciate your replies.

Hi @Nawal, will you be able to take a look at this? 

 

[waynewyl]

Sorry I'm new here, is Nawal a staff from UFile in which I can expect to get a response from?

[Nawal]

Hi @waynewyl, an email has been to you to have the anonymous copy of the file to see what is wrong. Thanks

[Nawal]

@waynewyl, based on your amounts, you can deduct up to $20,000 for the year.

[waynewyl]

Hi @Nawal, my concern is not how much I can deduct for the 2020 tax return, I understand that it's up to $20,000.

My concern is whether the additional contributions I made in first 60 days is considered as overcontribution. 

 

[cecilia8chen]

Hi Waynewyl,

Did you resolve this? I have the same warning on my tax summary and I believe I am in the same situation.

Is your $8,000 contribution in the first 60 days of 2021 considered an over-contribution? Or is it okay to be deducted in 2021 and we can just ignore the warning?

Thanks in advance.

[Nawal]

Hi @cecilia8chen, contributions made in the first 60 days of 2021 are considered to be RRSP contributions made in 2020. Here is what the CRA says:

[AltaRed]

Ass I have posted in another section, it has been historically correct (or commonplace) to allocate contributions made in the first 60 days of the year, e.g. Jan 1-Feb 28 2021 apply, in whole or in part, to the prior tax year 2020, or to the current tax year.  That may no longer be the case (to be confirmed) but in this instance, just do a manual override as noted by TheTaxSmith to limit how much of the 2021 contribution applies to the 2020 tax year. I did this on a regular basis for some time (and ignored the UFile warning).

At one time TurboTax (or as it was known before as QuickTax I think that I used in the 1990's) had an option to allocate the split. I have no idea what other software does today. In any case, it seems prudent for some research to be done to clarify whether the rules have changed at some point in time. It has been years since I made a RRSP contribution.

[kylexie186]

Hi @waynewyl ,

Do you have the result of this issue? Were you subject to an overcontribution penalty this year? I might run into the same problem next year...

Thanks!