Dear Nancy Woods,
For many years now, I've made my RRSP contribution early in the year for that current year's deduction, as opposed to catching up for the past year.
This means that I have to estimate how much to contribute, but it's been pretty consistently the same amount.
This year, I took advantage of an offer to contribute $5,000 to a fund to get a bonus, thinking I was well within my limit or I'd still be under the $2,000 allowable limit if there was an over-contribution.
Well, I was wrong. When I got my tax return I discovered that my contribution limit is only $1,500 and that I already was running an over-contribution total of about $800.
The upshot is that I'm now about $3,500 over-contributed. Is there anything I can do at this point? Can I just take it back out and pay the taxes?
Thanks, Rob
Dear Rob,
You are correct that the allowable amount you can carry as an over-contribution is only $2,000. You need to complete the Canada Revenue Agency form T3012A to remove the excess contribution amount without having tax withheld. The government would then ask you to complete and file a T1OVP form to calculate the penalty. You need to do it as quickly as possible because the penalty tax is 1 per cent per month.
You can choose to de-register the funds and pay the taxes, but the responsibility of paying the applicable penalty would be on you.
I've over-contributed to my RRSP. What can I do now?
Nancy Woods, CIM, FCSI, is an associate portfolio manager and investment advisor with RBC Dominion Securities Inc. To ask her a question, send an e-mail to asknancy@rbc.com
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