Why is RRSP contribution automatically reduced from the amount of previous year's withdraw of undeducted over-contribution?

[sjyangok]

I overcontributed my RRSP in 2016 by mistake. When I found the mistake in March 2017, I withdraw the over-amount and I did not use the over-amount for RRSP deduction in 2016 return. I got T4RSP for 2017. I use T746 Form to claim the over-amount as 2017 income and it is deducted in Line 232 of T1 General. The mistake is perfectly corrected. To my surprise, Turbotax also removed the over-amount from my 2017 RRSP contribution. It is not reasonable in my case, but I have no option to stop the removal. Any advise is much appreciated!

[TurboTaxAllen · Accepted solution]

The T746 in essence is removing the contribution from the calculated Undeducted RRSP contributions both on TurboTax file and your tax account with the CRA.   By allowing you to deduct the amount withdrawn as an unused contribution so that you are not taxed twice on the same amount. If it did not reduce the Undeducted RRSP Contributions you would have had two deductions for the same dollar.  A similar process occurs with the T3012A Waiver of Withholding Tax for Undeducted RRSP Contributions.  Alternately, you keep the excess contributions in your RRSP, possibly pay an excess contribution tax, but you would be entitled to a deduction of your unused RRSP contributions when you acquired sufficient RRSP deduction limit.  

[sjyangok]

Thanks for your quick reply. In fact, my over-contribution-then-withdraw amount ($4000) is triple taxed. I paid income tax for it in 2016 because I didn't use it for RRSP deduction; now Turbotax makes my 2017-RRSP deduction $4000 less, i.e. income increase of $4000; my financial institute hold $400 as tax when withdraw happened. How could this happen? Ridiculous!!

[igorkrug]

I have exactly the same issue with 2022 return. It looks like TURBOTAX  has bug. Line 23200  should offset deduction if has the same amount as T4RSP line 22 ...  This is according to CRA representative.

Turbotax support please advise ASAP.

Thanks

[TurboTaxSusan]

Please contact our phone support team at 1-888-829-8608 as they will be better able to assist you.