Contributions made in the first 60 days of the year can be used towards the previous year’s or current year’s contribution amount?

[Rohit]

Hello,

I made RRSP contribution in Feb with the intention to use those funds towards my 2023 return (and hence not claim the deduction on 2022 as my 2021 NOA had the lower limit).

I indicated on UFILE that I would like to claim RRSP deduction equal to my limit from 2021 NOA and the remaining portion (Which was contributed during Feb 2023) will be carry forward and I will claim that next year.

 

But I am getting a warning "Your RRSP contribution exceeds your deduction limit by more than $2,000.The government will assess monthly penalties of 1% on your overcontribution.". Is this a bug on Ufile OR I can not use the contribution made during first 60 days of year 2023 on my return next year ? (i.e. for 2023) ? Please clarify 

 

[Curmudgeon]

The RRSP contribution year is not the calendar year. It runs from March 1 to March 1 and therefore contributions made in the first 60 days apply to the previous calendar year.

[romeo]

4 minutes ago, Curmudgeon said:

The RRSP contribution year is not the calendar year. It runs from March 1 to March 1 and therefore contributions made in the first 60 days apply to the previous calendar year.

Your answer though is contradictory to what has been shared on this thread:.

https://community.ufile.ca/topic/11412-rrsp-over-contribution-on-first-60-days/

[Geo123]

Hello romeo,

If you have an unused contribution to your RRSP from the first 60 days of 2021, the reporting method will depend on the actual situation.

 If the amount was reported in 2021 and not used in 2021, therefore carried over to 2022, then it is an unused contribution and the UFile program would have carried it over to 2022.

 IF you have a RRSP from the first 60 days of 2021, and it was never reported before, then you have to make an adjustment to your 2021 tax return or if you successfully NetFiled your 2021 tax return you can ReFILE your 2021 return after you have made the entry into your 2021 return.

[romeo]

2 hours ago, Geo123 said:

Hello romeo,

If you have an unused contribution to your RRSP from the first 60 days of 2021, the reporting method will depend on the actual situation.

 If the amount was reported in 2021 and not used in 2021, therefore carried over to 2022, then it is an unused contribution and the UFile program would have carried it over to 2022.

 IF you have a RRSP from the first 60 days of 2021, and it was never reported before, then you have to make an adjustment to your 2021 tax return or if you successfully NetFiled your 2021 tax return you can ReFILE your 2021 return after you have made the entry into your 2021 return.

Thank you. Real question is if the contribution made in first 60 days of 2023 would be counted towards over/excess contribution for 2022 return and hence will be subject to 1% penalty OR that will be carry forward and can be assessed as part of 2023 return next year?

[Geo123]

Hello romeo,

You should check with the CRA on how they determine the penalty on over/excess contribution.

[Curmudgeon]

What if I went over my RRSP deduction limit?

If you contribute more than $2,000 over your deduction limit, you'll have to pay a tax of 1% per month on the amount you over contributed.

You have 90 days after the end of the year to submit the T1-OVP 2022 Individual Tax Return for RRSP, PRPP and SPP Excess Contributions form to the CRA. You’ll use this form to calculate your penalty tax.

You can lower the penalty tax by withdrawing the over-contribution from your bank account and returning it to your RRSP as soon as possible.

If you want your bank to refund your over-contribution without charging the regular tax on RRSP withdrawals, you’ll need to ask the CRA to certify the over-contribution amount by filing a T3012A form right away. It might take some time, so if you don’t want to wait for a T3012A form to be approved by the CRA (which might be the case if the penalty tax is adding up) and if you don’t mind having tax withheld, you can make a regular withdrawal from your RRSP instead.

Although you’ll need to report the amount you took from your RRSP as income when you file your return, you can claim an offsetting deduction so your over-contribution doesn’t raise your taxable income for the year. For example, if the rest of your taxable income this year is $50,000, and your bank refunded $10,000 of an over-contribution to your RRSP, your total taxable income without an offsetting deduction will be $60,000. However, if you claim an offsetting deduction for your over-contribution, this will bring your taxable income back down to $50,000.

You can claim an offsetting deduction by submitting the T746 form when you file, as long as:

• You reasonably expected to claim a deduction for the contribution, either in the year you made the contribution or the year before; and
• You didn’t make the contribution with the plan to withdraw it later and deduct the offset amount.

https://www.hrblock.ca/blog/how-it-works-rrsps-the-first-60-days-and-more/#first60

[EdwardFranklin]

On 4/25/2023 at 1:26 AM, Curmudgeon said:

What if I went over my RRSP deduction limit?

If you contribute more than $2,000 over your deduction limit, you'll have to pay a tax of 1% per month on the amount you over contributed.

You have 90 days after the end of the year to submit the T1-OVP 2022 Individual Tax Return for RRSP, PRPP and SPP Excess Contributions form to the CRA. You’ll use this form to calculate your penalty tax.

You can lower the penalty tax by withdrawing the over-contribution from your bank account and returning it to your RRSP as soon as possible.

If you want your bank to refund your over-contribution without charging the regular tax on RRSP withdrawals, you’ll need to ask the CRA to certify the over-contribution amount by filing a T3012A form right away. It might take some time, so if you don’t want to wait for a T3012A form to be approved by the CRA (which might be the case if the penalty tax is adding up) and if you don’t mind having tax withheld, you can make a regular withdrawal from your RRSP instead.

Although you’ll need to report the amount you took from your RRSP as income when you file your return, you can claim an offsetting deduction so your over-contribution doesn’t raise your taxable income for the year. For example, if the rest of your taxable income this year is $50,000, and your bank refunded $10,000 of an over-contribution to your RRSP, your total taxable income without an offsetting deduction will be $60,000. However, if you claim an offsetting deduction for your over-contribution, this will bring your taxable income back down to $50,000.

You can claim an offsetting deduction by submitting the T746 form when you file, as long as:

• You reasonably expected to claim a deduction for the contribution, either in the year you made the contribution or the year before; and
• You didn’t make the contribution with the plan to withdraw it later and deduct the offset amount.

https://www.hrblock.ca/blog/how-it-works-rrsps-the-first-60-days-and-more/#first60

Thank you, I appreciate you for taking your time to explain it in brief

[MM1]

@Rohit

How did you handle the situation? I am facing the same this year.  I had seized my 2023 contribution room by 31st December 2023.

 

I contributed to RRSP in January & February 2024 which I would want to claim next year with 2024 return but Ufile is giving me same warning ""Your RRSP contribution exceeds your deduction limit by more than $2,000.The government will assess monthly penalties of 1% on your overcontribution."."