# 2014 RRSP overpayment



## bleagues (Sep 24, 2013)

In January of 2014 I made an RRSP contribution (trying to maximize full RRSP benefit) that I was going to use for my 2014 tax filing year during the Spring of 2015. The amount I contributed was based off of my 2012 tax return that I received during the Spring of 2013. I had assumed my RRSP limit would be similar seeing as my income for both years was similar. 

Well, after receiving my 2013 return in the mail I noticed my 2014 RRSP limit was about $4000 less than what I had assumed it may be (my earnings were similar year over year, but my pension adjustment was higher for the 2013 tax year). 

So, I am now realizing I have made an approximate $4000 over contribution to my RRSP. I also had already been using the $2000 allowable over contribution limit, so does this mean I am about $6000 over the limit and subject to penalties?

I have been to the CRA website, but it appears to deal with over contributions for the current tax season, not for someone who is ahead of the game and realizes they have screwed up for the next tax season.

Does anyone have any suggestions?

Or should I just withdraw $6000 from my RRSP?

Thanks in advance


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## Eclectic12 (Oct 20, 2010)

[ deleted old post ]

This article seems to say that since it was in the first two months of 2014 for the 2014 tax return, it won't be considered until the 2014 tax return is filed.



> ... Another way people can make an honest mistake is through confusion over which tax year an RRSP contribution is intended.
> 
> For example, a contribution made in the first two months of 2005 can be used either on your 2004 or 2005 tax return. This usually works to your advantage, says Brian Quinlan, a partner with Campbell Lawless Chartered Accountants. Since January's overcontribution can be applied to next year's tax return, many who think they have overcontributed actually haven't.


http://www.financialpost.com/story.html?id=4657a5f0-5930-47d1-8bdc-8fd80ab43fb3&k=23758


So the question seems to be whether stopping future RRSP contributions means that the 2015 RRSP limit will correct the problem.


It is an old article where I believe a lot more reporting is being done automatically via computers, so you probably should check with a tax professional.


Cheers


*PS*

More food for thought:
http://www.advisor.ca/tax/tax-news/over-contribution-retribution-75829
http://www.moneysense.ca/columns/above-the-rrsp-limit


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## blueeyetea (Feb 27, 2013)

I thought you could carry forward what you couldn't claim this year to another year - for example, in 2016 for 2015. Look up schedule 7, section D of the 2013 tax guide.


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## OptsyEagle (Nov 29, 2009)

I can't exactly follow whether you are currently $6000 over-contributed or $4,000 over-contributed, but it does sound like you are over-contributed. You will need to take back out of your RRSP the total amount of over-contribution minus $2,000, immediately. CRA will be calculating a 1% penalty per month on that amount, hence why doing it now is a lot better then waiting for them to let you know.

The withdraws are done under this form, which allows your financial institution to give you back these amounts without withholding tax.

http://www.cra-arc.gc.ca/E/pbg/tf/t3012a/t3012a-12e.pdf

Oh yeah. In case you haven't figured it out yet, people with pensions pretty much have to wait until they get their notices of assessment before they can make an RRSP contribution for the current year. Also, the $2,000 over-contribution allowance was not implemented to allow Canadians to put $2,000 more into their RRSPs. It was implemented because it can accommodate small mistakes like the one you just make. When you use it before hand, you leave yourself no room for error.

Anyway, a little late for a lecture. Good luck.


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## Eclectic12 (Oct 20, 2010)

^^^^^

If the OP has already used the $2K over-contribution limit and the Jan 2014 RRSP contribution was estimated at $4K more than what the 2013 NOA is listing as the 2014 RRSP contribution limit, then it seems clear that overall the OP is $6K over but CRA is likely to charge on $4K.


I started out thinking an RRSP withdrawal ASAP is required but Brian Quinlan, a partner with Campbell Lawless Chartered Accountants seems to be saying that as long as the 2014 Limit is calculated so that it can absorb the $4K over contribution, time will fix the issue without CRA getting involved.


I don't need the headache so I stick under what the NOA says unless I can find a calculation error or something similar .... :biggrin:



Yes ... using up the $2K allowance in advance leaves less wiggle room ... but there are many articles/talking heads who recommend this action. In fact, the reduction from something like an $8K over contribution allowance was a direct result of the gov't seeing this action.


Cheers


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## OptsyEagle (Nov 29, 2009)

Eclectic12 said:


> ^^^^^
> 
> I started out thinking an RRSP withdrawal ASAP is required but Brian Quinlan, a partner with Campbell Lawless Chartered Accountants seems to be saying that as long as the 2014 Limit is calculated so that it can absorb the $4K over contribution, time will fix the issue without CRA getting involved.


Sure, if the 2015 limit is increased by $4,000 from the calculations done for the 2014 taxation year, then the penalties will stop in January 2015, but right now they are accumulating at $40 per month from the month the contribution was made.

From June on it would be another $240, since you can't dial this mistake back in time. With that information the OP can decide what they would prefer to do. As for CRA getting involved, it will be their computer that gets involved.


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## GoldStone (Mar 6, 2011)

Here's a nice, concise summary of your options:

RRSPs: Did you over-contribute?


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## Eclectic12 (Oct 20, 2010)

OptsyEagle said:


> Sure, if the 2015 limit is increased by $4,000 from the calculations done for the 2014 taxation year, then the penalties will stop in January 2015, but right now they are accumulating at $40 per month from the month the contribution was made.


The quote is that "Since January's over contribution can be applied to next year's tax return, many who think they have over contributed actually haven't."
Which seems to imply that despite the perception of an over-contribution, there isn't one. If there truly is no over-contribution, then there should not be a running penalty.


I don't understand how this could be possible as my understanding is that the time of the contribution is when having or not having enough room matters when evaluating what is an over-contribution.


Personally, I stick to the simple solution of withdrawing the over-contribution.


Cheers


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## OptsyEagle (Nov 29, 2009)

If you read the OP chain of contribution events, he/she is currently in a penalty paying over contribution position.

I know what you are saying. If the contribution in January was MEANT for the 2013 taxation year, they could simply decide to use it for the 2014 taxation year, and no penalties would apply. Unfortuneately, the OP planned contribution was MEANT for the 2014 taxation year and he/she is not allowed to use the 2015 taxation year, right now, to fix the mistake.


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## explorer416 (Jun 11, 2010)

I also made an incorrect calculation in my eagerness to contribute to everything I could (TFSA, RESP, RRSP) on January 2, 2014 and I contributed more to my RRSP than I should have. I had my 2013 taxes prepared in March and when I got my Notice of Assessment back, I realized that my carry-forward for 2014 exceeded my 2014 RRSP limit.

To fix this, I did the following:
I have been designating the yearly minimum to HBP (Home Buyer's Plan) repayment every year for the past few years, but there is still a balance of HBP repayments I must make. I actually revised my 2013 return to designate more of my 2013 RRSP contributions towards my HBP repayments. This meant I could apply some of my excess January 2014 RRSP contributions towards my 2013 return. I designated just enough to HBP on my 2013 return so that my 2014 RRSP carry-over no longer exceeds my 2014 RRSP limit.

If you took advantage of HBP in the past and are still in the process of paying that back, this may work for you.

If not, just withdraw it back.


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## Eclectic12 (Oct 20, 2010)

OptsyEagle said:


> If you read the OP chain of contribution events, he/she is currently in a penalty paying over contribution position.


We agree.




OptsyEagle said:


> If the contribution in January was MEANT for the 2013 taxation year, they could simply decide to use it for the 2014 taxation year, and no penalties would apply...


That's what is making my head hurt. :biggrin:

I see no relevance of the timing as a contribution is a contribution, regardless of when it might be deducted from income. The contribution limit test is going to be applied by CRA *when the contribution was made*. 

The only way I can see "no penalty" is where there is sufficient contribution room to accommodate the contribution.


This appears to be confirmed as a more thorough reading of the article indicates that where an over contribution is made 


> The 1% penalty per month still applies.



The best I can figure is that the article was written badly. 

The situation that seems to match is where people like the OP, have used up their RRSP contribution room and make more contributions in the first sixty days of the year. They look at the NOA RRSP contribution number and assume it's an over contribution. This may not be the case as fresh contribution room may have been earned but will not be documented/quantified until the return is filed.


Cheers


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