# Unused RRSP contributions



## Money4life (May 17, 2012)

So I'm trying to help my fiance with her RRSP contributions for tax year 2012. Her RRSP deduction limit for 2012 is $5,952. She also has $242 of unused RRSP contributions. Does this mean that she put $242 into an RRSP in the past but never properly claimed it when she filed her taxes? This amount of unused contributions goes back until at least tax year 2009 (she doesn't have any notice of assessments prior to that). Does she need to fill out a Schedule 7 form and just claim this amount when she does her taxes this year? She doesn't have any original receipts for this amount of money. Is there another alternative that can be done that makes more sense for this scenario?

While we're on this topic, I've been made aware that one is allowed to over-contribute by $2000 in their lifetime. So once this $242 gets settled, does that mean that in her lifetime, my fiance still able to over-contribute by $1758?

Sorry I'm a bit confused by this. Thanks for the help.


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## Daenerys Targaryen (May 11, 2012)

My understanding of the unused RRSP contribution room which appears on a Notice of Assessment is that figure is the amount of RRSP contribution room which was earned in a previous year but not contributed to an RRSP. If contribution room is earned but not used, it carrys over to future years. So your fiance can contribute 5,952+242 to her RRSP. If your fiance has never used her $2000 over-contribution allotment and wants to use it this year than the maximum she can contribute to her RRSP 5,952+242+2000.


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## domelight (Oct 12, 2012)

Money4life said:


> So I'm trying to help my fiance with her RRSP contributions for tax year 2012. Her RRSP deduction limit for 2012 is $5,952. She also has $242 of unused RRSP contributions. Does this mean that she put $242 into an RRSP in the past but never properly claimed it when she filed her taxes? This amount of unused contributions goes back until at least tax year 2009 (she doesn't have any notice of assessments prior to that). Does she need to fill out a Schedule 7 form and just claim this amount when she does her taxes this year? She doesn't have any original receipts for this amount of money. Is there another alternative that can be done that makes more sense for this scenario?
> 
> While we're on this topic, I've been made aware that one is allowed to over-contribute by $2000 in their lifetime. So once this $242 gets settled, does that mean that in her lifetime, my fiance still able to over-contribute by $1758?
> 
> Sorry I'm a bit confused by this. Thanks for the help.



Here is the correct answer.

The $ 242 is an rrsp purchase that has bever been deducted. It may not have been deducted due to a previous over contribution or possibly it was not needed as no tax was owing.
1. If you purchase $ 5,710 worth of RRSP's and deduct the unused carryforward then you will have the maximum for the year. The math is this... RRSP deduction Limit = $ 5,952 - $ 242 = $ 5,710 (your current year RRSP purchase) 
2. In the event you purchased 7,710 you would have an over contribution of 2K. You would then see the 2k on next years notice of assessment where you see the $ 242 now. Keep in mind you are not getting a tax break for the over contribution. ( Simply put you are prebuying 2k worth of RRSP's for the susequent tax year)
3. The only benefits to over contributing is that you get a head start on next years RRSP purchases and any growth the 2k realizes is tax sheltered until eventual withdrawl.
4. Although many financial advisors would disagree with me, and you must absolutely take into consideration where you income is now vs. where it will be when you withdrawl the RRSP's. I am a big believer in pay your mortgage first. For example if your mortgage has 10 years remaining at 3% interest. ask yourself this. Will my RRSP's guarantee a fixed growth of 3% each and every year ? Take that extra 2,000 and put it on your mortgage and you are guaranteeing yourself a fixed rate of savings of 3% per year.
5. If you read the instructions at the top of schedule 7 it says only use this form if you are carrying forward unused deductions (in addition to some other rules) So if you plan to over contribute the 2k then yes use scheule 7. If all you want to do is use up the $ 242 then this amount simply goes in the normal RRSP deduction calculation you will see a liune that says "Plus RRSP deduction room from 2011" (it is misleading it would make more senese if it said unused rrsp contributions)
6. If you follow Daenerys math above "she can contribute to her RRSP 5,952+242+2000" then you will have overcontributed by $ 2,242.00 this is 242 over the allowable 2k over contribution. although unlikely CRA would pursue a 242 overcontribution the penalty would be 1% per month of the $ 242. Howewver CRA has been paying close attention to over contributions lately and are being very agressive as of late.


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## Money4life (May 17, 2012)

domelight said:


> Here is the correct answer.
> 
> The $ 242 is an rrsp purchase that has bever been deducted. It may not have been deducted due to a previous over contribution or possibly it was not needed as no tax was owing.
> 1. If you purchase $ 5,710 worth of RRSP's and deduct the unused carryforward then you will have the maximum for the year. The math is this... RRSP deduction Limit = $ 5,952 - $ 242 = $ 5,710 (your current year RRSP purchase)
> ...


Wow, domelight. Thorough answer. Thank you for this.

Just so I have a perfect understanding. My fiance should only be contributing $5,710 into her RRSP and ignore the $242 because that amount will get deducted when she files her taxes? So on line 208 - RRSP Deduction, even though she is putting $5,710 into an RRSP, she is technically deducting an extra $242 so the amount of $5,952 will get inserted? Even if she doesn't have any receipts for this $242?

It seems like it would make more sense to over-contribute $2000 at the start of a tax year rather than the end. So this isn't a once a lifetime thing and can be done during any tax year? So with the extra $2000, you get early tax-sheltered growth but the only condition is that you can't claim it on your tax return until the following year. So say I over-contributed by $2000 in March this year, I would not get penalized 1% per month by the government as long I submit a Schedule 7 Form when I submit my tax return for 2013? This seems like something that everyone should be taking advantage of if I'm understand this correctly. 

As for paying off your mortgage as quickly as possible, I see what you are saying but luckily (or unluckily?), I do not have a mortgage and am still renting at the present time.

EDIT: Hmm, damn. I think I may have misinterpreted what you said. If I over-contributed by $2000, I would not be getting a tax credit when I file my taxes (even in the following year) because the contribution was already made previously but not deducted because I went over? So my fiance is not going to get a tax credit for the $242, even though it will be reported as a deduction this year?

In any case, is the early tax-sheltered growth of $2000 better than getting a tax credit? I'm not so sure.


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## Eclectic12 (Oct 20, 2010)

Money4life said:


> ... My fiance should only be contributing $5,710 into her RRSP and ignore the $242 because that amount will get deducted when she files her taxes? So on line 208 - RRSP Deduction, even though she is putting $5,710 into an RRSP, she is technically deducting an extra $242 so the amount of $5,952 will get inserted? Even if she doesn't have any receipts for this $242?


In Schedule 7, line 10 - you are identifying what is to be deducted for this tax year. If you want to claim both the $5,710 contributed and the $242 that hasn't been deducted - enter the $5952 there.

Everything should flow correctly after that as the previous parts of Schedule 7 have identified the $242 as not needing receipts (i.e. line 1).

http://www.cra-arc.gc.ca/E/pbg/tf/5000-s7/5000-s7-12e.pdf


Cheers


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## Money4life (May 17, 2012)

Eclectic12 said:


> In Schedule 7, line 10 - you are identifying what is to be deducted for this tax year. If you want to claim both the $5,710 contributed and the $242 that hasn't been deducted - enter the $5952 there.
> 
> Everything should flow correctly after that as the previous parts of Schedule 7 have identified the $242 as not needing receipts (i.e. line 1).
> 
> ...


OK. So I do need to complete this Schedule 7 Form for this amount of $242 and not just when I plan to over-contribute in advance.


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## Eclectic12 (Oct 20, 2010)

Money4life said:


> OK. So I do need to complete this Schedule 7 Form for this amount of $242 and not just when I plan to over-contribute in advance.


After the undeducted $242 amount exists and is on the NOA - it is the safest way as it clearly documents why there are no receipts. CRA might catch this just by entering the total on line 208 but why take the risk of wasted time?

The way the unused amount starts in the first place is if line 10 is less than line 9, which will make line 14 "Your unused RRSP contributions available to carry forward to a future year" a greater than zero number. 

Note that this situation could be from an over-contribution or it could be simply because one is deferring the tax deduction to a future year when a larger than usual income is expected. 


Cheers


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## Money4life (May 17, 2012)

Eclectic12 said:


> After the undeducted $242 amount exists and is on the NOA - it is the safest way as it clearly documents why there are no receipts. CRA might catch this just by entering the total on line 208 but why take the risk of wasted time?
> 
> The way the unused amount starts in the first place is if line 10 is less than line 9, which will make line 14 "Your unused RRSP contributions available to carry forward to a future year" a greater than zero number.
> 
> ...


Okay so since a total appears on the NOA under unused contributions, you should fill out and submit a Schedule 7 Form when filing taxes. But say I over-contributed by $2000 in March of this year, I wouldn't have to fill out one of these Schedule 7 Forms until I see an actual amount on my NOA under unused contributions? And I would not get penalized for over-contibuting even though technically it wouldn't appear on a NOA until the following year?


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## OhGreatGuru (May 24, 2009)

There is another (old) thread around here somewhere dealing with much the same question.

Her RRSP Deduction limit for 2012 is $5952.
But since she has $242 of unused contributions from previous years her RRSP Contribution limit for 2012 is ($5952 - $242) = $5710.

If she makes that contribution, she can claim the $5710 + the $242 from earlier, unused, contributions as a deduction in completing her 2012 income tax return.

As for how the $242 came about, she may have accidently made an overcontribution; She may have made an error in filing a tax return, deducting less than she had contributed; or CRA may have adjusted her tax return(s) to carry forward this amount because she did not need to claim all her contribution(s) in order to reduce her tax to zero. There are probably other ways as well, but those are ones I can think of.


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## Money4life (May 17, 2012)

Thanks for your message, Guru.

I know I've asked a lot of questions in this first page but I've got another one. After looking into these Notice of Assessments closer, it appears for Tax Years 2009 and 2010, her unused contribution was actually at $224 but in Tax Year 2011, her unused contribution reached $242. Do you think this could be a typo or would the CRA never mess up with this kind of stuff? In Tax Year 2011, my fiance made a full contribution as per her 2011 deduction limit but didn't factor in the $224 that appeared as unused contributions. Would Line 10 of her Schedule 7 only have what she contributed but Line 9 also had this same amount plus the $224? Could this be why the unused contributions went up to $242?


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## Eclectic12 (Oct 20, 2010)

Money4life said:


> Okay so since a total appears on the NOA under unused contributions, you should fill out and submit a Schedule 7 Form when filing taxes. But say I over-contributed by $2000 in March of this year, I wouldn't have to fill out one of these Schedule 7 Forms until I see an actual amount on my NOA under unused contributions? And I would not get penalized for over-contibuting even though technically it wouldn't appear on a NOA until the following year?


The over-contribution in Mar 2013 should have a receipt that is being reported on Schedule 7 of your 2013 tax return being filed in 2014.
As long as the over-contribution is not over the $2K - then there is no penalty.

The risk is that if you don't track it properly, resulting in a mistake so that the over-contribution exceeds the $2K. That would generate penalties.

So personally, I would leave a buffer as well as make the over-contribution late in the tax year or in the first 60 days of the next year so that the NOA is up to date asap.

... but that's just me. :biggrin:


Cheers


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## Money4life (May 17, 2012)

Eclectic12 said:


> The over-contribution in Mar 2013 should have a receipt that is being reported on Schedule 7 of your 2013 tax return being filed in 2014.
> As long as the over-contribution is not over the $2K - then there is no penalty.
> 
> The risk is that if you don't track it properly, resulting in a mistake so that the over-contribution exceeds the $2K. That would generate penalties.
> ...


Awesome. Thanks for this info. And you can do this during as many tax years as you want, correct? Do you personally over-contribute or hold off until you get enough room in the next tax year to not over-complicate things?

From what I'm piecing together here, if I over-contributed in March 2013, I would still be able to claim a full tax credit for this when I file my taxes in 2014 for tax year 2013? The only downside is that I wouldn't be able to claim the tax credit right away?

Sorry for all of the questions. I appreciate the help.


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## Money4life (May 17, 2012)

So I got my fiance to sign up online on the CRA website and I figured out where the unused contributions started from. You guys were right...during an older return (2009), for whatever reason, the total RRSP contributions weren't deducted on the tax return; it was off by $224. It was probably an error as opposed to being intentional. And then last year, my fiance unknowingly over-contributed by $18 which was why that the Unused Contribution Amount went up to $242 (the total contribution was deducted aside from the $18). This will be addressed during this tax return as only the difference has been contributed into an RRSP.

I think what confused me earlier was not understanding the difference between a contribution and a deduction. Clear as mud now. Thanks guys.


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