What to do about RRSP overcontributions

By Staff | April 17, 2017 | Last updated on April 17, 2017
3 min read

Have you exceeded your RRSP contribution limits? Congratulations, your retirement account is that much bigger. But you may also be facing some tax penalties.

If your contributions exceed your deduction limit by more than $2,000, you’ve overcontributed.

Here’s what you can do.

Decide whether to withdraw the money

CRA may penalize overcontributions above the $2,000 cushion by 1% of the excess amount per month, but your client isn’t obligated to withdraw the money, says Sandy Kirkwood-Pearce, managing partner of EPR Trillium LLP. “If the investment is doing really well, the consequences of the overpayment penalty […] might be overshadowed,” she says.

Ask CRA to waive withholding tax

If you decide to remove the money, ask CRA to waive withholding tax, which can be up to 30%.

  • Use Part 1 of T3012A Tax Deduction Waiver on the Refund of your Unused RRSP, PRPP, or SPP Contributions from your RRSP to calculate the amount the RRSP administrator can refund without withholding tax.
  • Under Part 2, designate which RRSP to withdraw the money from, and a destination account.
  • Attach proof of the overcontributions, such as certified copies of receipts, and send four copies of the form to CRA.
  • If CRA approves, it will return three signed copies of the form to your client.
  • Send the copies to your client’s financial institution.
  • Once the withdrawal is done, the institution will return two copies.

Here’s a tip: Filling out the T3012 may not be worth the time, or the accountant’s fees, if there’s little tax to be withheld, says Karen Slezak, a tax partner at Crowe Soberman LLP.

“Withdraw the overcontribution and don’t worry that there will be some withholding tax,” she says. The tax withheld will count toward your annual tax return. Take the money out in batches under $5,000 to minimize withholding tax, Slezak adds.

Another tip: After the withdrawal, CRA will reduce your available carry-forward of unused contributions by the amount of the withdrawal, and issue a new notice of assessment, says Kirkwood-Pearce.

Ask CRA to waive contribution tax

Ask CRA to waive the 1% monthly excess contribution tax. CRA may approve your request, if your excess contributions arose due to a reasonable error and you’re withdrawing, or have withdrawn, the excess contributions.

To make the request, fill out Form RC4288 Request for Taxpayer Relief – Cancel or Waive Penalties or Interest, or write to CRA explaining:

  • why the error was made, why it’s reasonable; and
  • any steps you’ve taken to eliminate the excess contributions.

Include copies of supporting documents, such as RRSP statements, showing your client has withdrawn the excess funds, and any correspondence related to the error.


If CRA assesses the unused contribution room as a negative amount, if you received gift money in you RRSP, or you contributed money to your partner’s RRSP without claiming a tax deduction, you may have to submit Form T1-OVP Individual Tax Return for RRSP Excess Contributions.

Determine whether you should submit the form with CRA’s T1-OVP quiz on page 21 of CRA’s RRSP guidance. If necessary, complete the T1-OVP. Then send CRA the form and outstanding tax.

Be warned: Your payment is due 90 days after the end of the tax year. Starting on day 91, CRA charges compound daily interest on unpaid tax or penalties, a late filing penalty of 5% of the balance owing, and 1% of the balance for every month a return is late.

Complete your return

Finally, complete your annual return. If your paid withholding tax:

  • Fill out form T746, Calculating Your Deduction for Refund of Unused RRSP Contributions.
  • Enter the amount on Line 11 of the T746 on Line 232 of the return (complete a separate T476 for each year of overcontributions).
  • Write the amount in Box 20 of your T4RSP Statement of RRSP Income slip on Line 129 of the return.
  • Submit the T746 and T4RSP with your return.

If you didn’t pay withholding tax and already filed the T1-OVP, complete your return as usual.

Advisor.ca staff


The staff of Advisor.ca have been covering news for financial advisors since 1998.