RRSP Excess contribution rules

[nimeshkshah]

2018 RRSP excess contribution is more than $ 2000 but less then my 2019 RRSP room ,Am I penalized by CRA?

[TurboTaxKim]

You likely will not be penalized if you will have enough available room in 2019 to deduct the excess contribution. 

You'll need to report the entire amount of your RRSP Contribution on your tax return, and TurboTax will automatically carry forward the amount in excess of your contribution limit to the following year. The Canada Revenue Agency allows you to overcontribute to your RRSP's one time in the amount of $2,000 without there being a penalty.  If you overcontributed in the First 60 Days, you still need to report the contribution on this year's tax return, you can claim the overcontribution on your income tax return next year. 

[altheab]

Would I be penalized for 2018 tax year's RRSP overcontributions if my available contribution room for 2019 is a (negative) number?

Do I have to include the unused RRSP contribution amount in this year's tax return?

[TurboTaxHeba]

You have to include your unused contribution in your RRSP calculations for 2019.

You will not be penalized if you overcontributed by $2000 and you are 19 years or older.

This $2000 room is to allow you to increase your contribution limit for 2020 to cover the overcontribution in 2019, just make sure you don't over contribute again because this $2000 over-contribution is a one-time life pass from CRA.

If you have overcontributed more than $2000, then you will need to withdraw the excess amount, file form T3012A or a voluntary disclosure. Refer to these two links for more information: 

https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/rrsps-related-plans/making-w...

https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/rrsps-related-plans/contribu...

I hope this was helpful

[altheab]

My husband's NOA for tax year 2018 showed he made RRSP over contributions in the amount of $1326.00.  He also made contributions of $560.00 during the first 4 months of 2019 as we were not aware that retirees, even under the age of 71, can no longer contribute to an RRSP.  He will include both those amounts in this year's tax returns, but does he still qualify for the one-time  $2000.00 limit relief even if his over contributions occurred in two successive years? 

Am I correct in assuming that his unused RRSP contributions cannot be carried forward to future years since he is retired and only has a pensionable income?  Thanks in advance for your response.

[TurboTaxHeba]

If I understand correctly, both of you are retired, which means you can't increase your contribution limit for future years to cover this overcontribution amount. A big portion of the contribution limit every year comes from 18% of the employment income of the prior year. So if your husband is not working, then the chance of him covering this amount is very slim.

You can't use the $2000 over-contribution limit twice in your lifetime, and if you use it once, you have to be able to cover it the next year by increasing your contribution limit from employment income. If you can't, then you should withdraw this amount because the penalty for keeping it is higher than withdrawing it.

Unused contribution can be used for any succeeding year even for retirees because the contribution itself has been claimed in the past. Keep in mind, if you don't have a taxable income then claiming this amount won't change the tax liability. 

I hope this was helpful

[altheab]

Thanks for your response however I am not sure i understand the content of the last paragraph in your response.  Could you elaborate further? 

Also, isn't income from a RIF, company pension, and Canada Pension considered as taxable income?  Taxes are being withdrawn at source from all three.  Would not have Revenue Canada instructed my husband on his Notice of Assessment to either withdraw the funds from his RRSP, or to complete and submit a form T1-OVP?

Thanks!