# 2016 RRSP Maxed Out and Over Contribution in Jan & Feb, 2017.



## scorpion_ca (Nov 3, 2014)

I have maxed out my RRSP contribution limit for 2016. Employer has reinstated our group matching RRSP plan in Jan, 2017. Therefore, we will be contributing around $1,700 for the first 60 days of 2017 to my RRSP account. As I already maxed out my contribution limit with my personal brokerage, what are my options in a tax efficient way of dealing with that $1,700? Thanks!


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## OnlyMyOpinion (Sep 1, 2013)

Sounds like the easiest plan may just be to use your max'd contributions for 2016 and let the $1700 become part of your 2017 contribution. 
Just because the $1700 will show up as a contribution in the 'first 60 days' of 2017, there is nothing to prevent it from being used for 2017.
After your 2016 taxes are processed your NOA will tell you what your 2017 RRSP contribution limit is (based on 2016 income). Make sure you factor in what will be contributed by your employer for 2017 when making any of your own contributions and don't exceed your 2017 limit.


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## scorpion_ca (Nov 3, 2014)

OnlyMyOpinion said:


> Sounds like the easiest plan may just be to use your max'd contributions for 2016 and let the $1700 become part of your 2017 contribution.
> Just because the $1700 will show up as a contribution in the 'first 60 days' of 2017, there is nothing to prevent it from being used for 2017.


How do I do it? Just don't mention that $1,700 while filing income tax return for 2016? 

There will be two options in the tax software for 2017 income tax return....first 60 days of 2018 and rest of the 2017. Where do I mention that $1,700 as it already deposited in the first 60 days of 2017?


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## gardner (Feb 13, 2014)

scorpion_ca said:


> How do I do it? Just don't mention that $1,700 while filing income tax return for 2016?


I believe that would be technically legal, but it is not consistent with their policies, which is the real issue in almost all cases.

You will report the amount on your 2016 forms as having been contributed in the first 60 days of 2017. It will not create an over-contribution because it is made in 2017.

When your 2016 assessment comes back it will say that you have an unused contribution from previous years or $1700, and you will enter that into your tax software in 2017 tax year and deduct it then.


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## OnlyMyOpinion (Sep 1, 2013)

I'm not sure regarding the particular software you are using, but it will involve completing Schedule 7. See the pdf of _Schedule 7 - RRSP and PRPP Unused Contributions ..._here: http://www.cra-arc.gc.ca/E/pbg/tf/5000-s7/README.html. 

Specifically, _You will not be deducting on your return for 2016 all the RRSP contributions and your PRPP contributions made from March 1, 2016, to March 1, 2017._ Also see Line 3, _Enter the RRSP and your PRPP contributions made from January 1, 2017, to March 1, 2017 (attach all your receipts)._ and Line 18.

I'm familiar with Turbotax, and I know that if you are using their 'interview method' and you miss or misstate some of their questions, it may not offer you all of the forms you need and can end up incorrect. So be careful that your software has you report contributions up to March 1 2017 but then don't claim the J-F 2017 contributions. 

Also, I've not had a company's contributions involved so I suggest you proactively approach your HR or accounting folks and confirm that they will be issuing you a contribution receipt for J-F 2017. Some might choose to apply this to 2016 but you won't, you'll be using Sched 7.

Your NOA when it arrives should show your _2017 RRSP/PRPP deduction limit (A)_ of $xxx based on your 2016 income, and the next line will be your J-F 2017 contributions shown as "_Minus: Unused RRSP/PRPP contributions previously reported and available to deduct for 2017 (B)" _


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## My Own Advisor (Sep 24, 2012)

You could treat it as an over-contribution - can't claim/deduct the excess though.

Here is one reference of many:
https://turbotax.intuit.ca/tips/how-to-resolve-rrsp-over-contributions-5540


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## Eclectic12 (Oct 20, 2010)

scorpion_ca said:


> I have maxed out my RRSP contribution limit for 2016.
> 
> Employer has reinstated our group matching RRSP plan in Jan, 2017 ... As I already maxed out my contribution limit with my personal brokerage, what are my options in a tax efficient way of dealing with that $1,700?


You might have to review/change your plans for 2017 ... but are you sure you have over-contributed?

If by maxed out 2016 means you equaled the 2016 RRSP contribution room, don't forget you are allowed to over-contribute by $2K (you just can't deduct it). https://www.bdo.ca/en-ca/insights/tax/weekly-tax-tips/avoid-rrsp-overcontributions/

Secondly ... your 2017 RRSP contribution room earned, which is based on the 2016 income became available in Jan 2017. The 2016 tax return hasn't been filed yet so variations income/RRSP deduction against income etc. haven't been worked out yet to end up with the final number. Assuming nothing changed much, you can get a reasonable estimate of what's added for 2017 by looking at how much was added in 2016. Based on the formula, it should be at minimum of $600.

If you want to work out a better estimate, the most commonly applicable factors are in this article (if I find it again, I'll post CRA's more complete version).
http://www.taxtips.ca/rrsp/rrspcontributionlimits.htm


Bottom line is that for such a small amount as $1,700, with CMF users having higher type incomes - unless you've been intentionally over-contributing just under the $2K allowance ... I suspect that over-contribution to the point of penalties is not likely until well into 2017, which one can plan for.




gardner said:


> scorpion_ca said:
> 
> 
> > How do I do it? Just don't mention that $1,700 while filing income tax return for 2016? ...
> ...


As I understand it, the financial institutions are required to send the contribution information, among other data. Skipping recording the contribution it won't work, AFAICT. (Never tried it though ... :biggrin: )


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## scorpion_ca (Nov 3, 2014)

OnlyMyOpinion said:


> I'm not sure regarding the particular software you are using, but it will involve completing Schedule 7. See the pdf of _Schedule 7 - RRSP and PRPP Unused Contributions ..._here: http://www.cra-arc.gc.ca/E/pbg/tf/5000-s7/README.html.
> 
> Specifically, _You will not be deducting on your return for 2016 all the RRSP contributions and your PRPP contributions made from March 1, 2016, to March 1, 2017._ Also see Line 3, _Enter the RRSP and your PRPP contributions made from January 1, 2017, to March 1, 2017 (attach all your receipts)._ and Line 18.
> 
> ...


I will be using Studio Tax. With regards to schedule 7, I think if I enter data the following way and file my income tax return, there shouldn't be any problem.

Line 1 = 0 (NOA 2015 B info)
Line 2 = 10,000
Line 3 = 11,700
Line 4 = 21,700
Line 5 = 21,700


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## scorpion_ca (Nov 3, 2014)

My Own Advisor said:


> You could treat it as an over-contribution - can't claim/deduct the excess though.
> 
> Here is one reference of many:
> https://turbotax.intuit.ca/tips/how-to-resolve-rrsp-over-contributions-5540


The link takes to spam/unsafe website.


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## scorpion_ca (Nov 3, 2014)

Eclectic12 said:


> You might have to review/change your plans for 2017 ... but are you sure you have over-contributed?


I will be over contributing as I don't want to miss $850 that employer would match or provide free. 2017 RRSP contribution limit would be around $19,500. So, I will be be able to adjust that $1,700.

I also contacted brokerage and they suggested to submit T3012a to CRA and once it is approved, forward them copies that they can return that $1,700 without withholding tax.


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## Spudd (Oct 11, 2011)

scorpion_ca said:


> I will be over contributing as I don't want to miss $850 that employer would match or provide free. 2017 RRSP contribution limit would be around $19,500. So, I will be be able to adjust that $1,700.
> 
> I also contacted brokerage and they suggested to submit T3012a to CRA and once it is approved, forward them copies that they can return that $1,700 without withholding tax.


It's not over-contributing if you contribute it in 2017, even if it is in the first 2 months.


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## Benting (Dec 21, 2016)

You can over contribute up to $2000, that is if you do not need the money. I always do that every year. As matter of fact, every January, I max my RRSP contribution for the current year base on my total income of the pervious year. And, make sure I over contribute just shy of 2k that is allowed.


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## Eclectic12 (Oct 20, 2010)

scorpion_ca said:


> I will be over contributing as I don't want to miss $850 that employer would match or provide free. *2017 RRSP contribution limit would be around $19,500.* So, I will be be able to adjust that $1,700.


Adding $19.5K for 2017 dwarfs the $1.7K you are mentioning for the first sixty days of 2017 RRSP contribution so I don't see how there is an RRSP over-contribution, even if it is an optimistic estimate.

While CRA doesn't have the numbers yet to confirm 2017 RRSP contribution room granted - $1.7K is smaller than the $2K over-contribution allotment before penalties kick in, so again I see no penalty.


Or am I missing something?


Cheers


*PS*



> Luckily, there’s a $2,000 cushion. In other words, there’s *no tax penalty on the first $2,000 of excess contributions* no matter why the deposits happened ... Anything above the $2,000 amount? You pay one per cent tax on the excess amount each month, and there could be other interest and penalties too.


http://www.theglobeandmail.com/glob...serve-our-sympathy-no-really/article22944762/


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## Tawcan (Aug 3, 2012)

My understanding is that contributions made in the first two month of the year can be used for previous year (2016) or 2017. The choice is yours.


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## My Own Advisor (Sep 24, 2012)

Sorry about that...worked for me...TurboTax is not unsafe.


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## Eclectic12 (Oct 20, 2010)

Tawcan said:


> My understanding is that contributions made in the first two month of the year can be used for previous year (2016) or 2017. The choice is yours.


That's true for deducting the contribution from income.

The OP however is worried that the early 2017 RRSP contributions are *over* contributions, which means what matters is what RRSP contribution room is available at the time the contribution is made. When it is deducted makes no difference as to where an over-contribution occurred AFAICT.


As I understand that the 2017 RRSP contribution being added based on the 2016 income is available for use Jan 1, 2107 (plus the OP says the expected 2017 amount is so large), I don't think there is over-contribution.


Cheers


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## scorpion_ca (Nov 3, 2014)

Benting said:


> You can over contribute up to $2000, that is if you do not need the money. I always do that every year. As matter of fact, every January, I max my RRSP contribution for the current year base on my total income of the pervious year. And, make sure I over contribute just shy of 2k that is allowed.


How long have you been doing this? Will there be any consequence with CRA down the road? This is what I have found online. "You’re permitted to overcontribute a *cumulative lifetime* total of $2,000 to your RRSP without incurring a penalty tax". http://www.taxplanningguide.ca/tax-planning-guide/section-2-individuals/rrsp-overcontributions/


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## scorpion_ca (Nov 3, 2014)

delete repeat post

How to delete the repeat post?


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## scorpion_ca (Nov 3, 2014)

Eclectic12 said:


> Adding $19.5K for 2017 dwarfs the $1.7K you are mentioning for the first sixty days of 2017 RRSP contribution so I don't see how there is an RRSP over-contribution, even if it is an optimistic estimate.


The reason I have used the word over contribution is that if my 2016 RRSP contribution limit is 20,000 from Mar 2016 to Feb 2017 and I contribute 21,700 during that period. My understanding was that $1,700 is over contribution.


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## scorpion_ca (Nov 3, 2014)

My Own Advisor said:


> Sorry about that...worked for me...TurboTax is not unsafe.


The link is working now. I know TurboTax is safe but it was taking to other website yesterday.


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## My Own Advisor (Sep 24, 2012)

Good stuff. So, what did you decide? I think going with the <$2,000 lifetime over contribution is good.


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## Benting (Dec 21, 2016)

scorpion_ca said:


> How long have you been doing this? Will there be any consequence with CRA down the road? This is what I have found online. "You’re permitted to overcontribute a *cumulative lifetime* total of $2,000 to your RRSP without incurring a penalty tax". http://www.taxplanningguide.ca/tax
> ...sure I would not go over that lifetime limit.


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## Spudd (Oct 11, 2011)

scorpion_ca said:


> The reason I have used the word over contribution is that if my 2016 RRSP contribution limit is 20,000 from Mar 2016 to Feb 2017 and I contribute 21,700 during that period. My understanding was that $1,700 is over contribution.


That's where you have misunderstood. The contributions in Jan/Feb can be applied either to 2016 or 2017, so you'll just apply them to 2017 and you're all good.


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## scorpion_ca (Nov 3, 2014)

My Own Advisor said:


> Good stuff. So, what did you decide? I think going with the <$2,000 lifetime over contribution is good.


I have not decided yet as I am still learning and still little bit of confused. However, I will not miss that $850 free money from the employer.


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## scorpion_ca (Nov 3, 2014)

Spudd said:


> That's where you have misunderstood. The contributions in Jan/Feb can be applied either to 2016 or 2017, so you'll just apply them to 2017 and you're all good.


I did not know that I could apply contributions made in Jan/Feb to either 2016 or 2017. What is the consequences and resolution if I would make that $1,700 contribution in 2016?


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## OnlyMyOpinion (Sep 1, 2013)

Not in your case - you said have already contributed the maximum for 2016. You must use the J-F 2017 $1700 contribution for the 2017 year when that tax filing time rolls around next year. 
Just make sure you remember the $1700 and don't overcontribute through the balance of 2017 (i.e. stay within the contribution limit your NOA will show when you get it in April or so).


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## Spudd (Oct 11, 2011)

OnlyMyOpinion said:


> Not in your case - you said have already contributed the maximum for 2016. You must use the J-F 2017 $1700 contribution for the 2017 year when that tax filing time rolls around next year.
> Just make sure you remember the $1700 and don't overcontribute through the balance of 2017 (i.e. stay within the contribution limit your NOA will show when you get it in April or so).


Exactly.


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