I am in an over contributed state due to the complications caused through a matching company DPSP.
My company matches what I contribute...my contribution goes into an RRSP account...their contribution goes into the DPSP side...but is still part of my overall limit for RRSP contributions.
My notice of assessment notes that I have $4000 avail to put into my RRSP for next year...but have 8000 in unused contributions. I have also continued the matching program for an additional $3000 personal side and $3000 company side since March 1st.
So..I am going to be or already am.. $10,000 over contributed for the 2012 tax year...
Given my notice of assessment just received.. is calling out my unused contributions are already over my allowable limit for 2012 of $4000...and I may have to pay a 1`% penalty...what should I do....and when does the clock officially start ticking on the 1% penalty.
1. Wait till end of year to go thru the paperwork to have the over contribution removed?
2. Continue for the rest of the year getting the company to match my RRSP contribution...and then pull out an even larger amount at year end?
3. Stop all contributions to my company matching program effective immediately and fill out the paper work to have my pending over contributed condition corrected now.
Been there done that. Mine was cased by complications with a retroactive pension adjustment which changed my RRSP limit completely out of my control. They have no mercy; you will have to calculate the penalty yourself when you file your taxes next year. The 1% penalty starts the calender month you over contributed and ends the calender month when you withdraw it. Therefore the sooner you withdraw it the better. You will have to file a T1-OVP form and IIRC you cannot use tax software to file due to this. I am a little rusty on it but that form should answer everything.
You will need to fill out this form to have the withdrawals removed without withholding tax. As the above poster said. You need to do this right away. Next month it is another 1%.
When you make excess RRSP contributions, you may likely want to reduce the continuing penalties by withdrawal of the amount of excess beyond the permitted amount.