Level 6

Seniors and students

Your accountant was able to process your file by setting your RRSP contribution to zero,which you say it was in the past, and is for 2014. You must do the same thing. You cannot actually make a contribution to repay HBP if you have not made any RRSP contribution that year.

What has been happening is this. When you don't make a repayment yourself, CRA automatically reports for you an amount of RRSP income, on which you then will be taxed at your marginal rate. Effectively they are saying ok mr and mrs taxpayer, you withdrew money from your RRSP to fund home purchase,and we then did not tax you on the withdrawal. But now we are,since you didn't repay us.

This is quite fair and written in the HBP rules. It is not a penalty, merely tax collection.
Check your 2013 Notice of Assessment,it should explain what CRA has done.

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