What happens if you go over your RRSP/PRPP deduction limit?
If you (or your employer for pooled registered pension plan (PRPP) purposes) contribute more to your RRSP, PRPP or SPP, or your spouse's or common-law partner's RRSP or SPP than your RRSP/PRPP deduction limit allows, you will have an excess contribution.
Generally, you have to pay a tax of 1 % per month on excess contributions that exceed your RRSP/PRPP deduction limit by more than $2,000 unless you:
- withdrew the excess amounts
- contributed to a qualifying group plan
If you have to pay this 1 % tax, fill out a T1-OVP, 2016 Individual Tax Return for RRSP, SPP and PRPP Excess Contributions return and send it to your tax centre. Pay the tax within 90 days after the calendar year avoid late-filing penalties or interest charged.
Can the Canada Revenue Agency (CRA) cancel or waive the tax on your excess contributions?
You can ask the CRA in writing to consider cancelling or waiving the tax if you can explain:
- why your excess contributions were due to a reasonable error
- what steps you are taking, or have taken, to withdraw the excess contributions
Include the following with your letter:
- a request to cancel or waive the tax
- copies of your RRSP, PRPP, specified pension plan (SPP), or RRIF statements that show the date you withdrew your excess contributions
- any other correspondence that shows that your excess contributions are due to a reasonable error
Send your letter to the following address:
RRSP Return Processing Unit
Ottawa Technology Centre
875 Heron Road
Ottawa ON K1A 1A2
How does a voluntary disclosure work?
If you realize the information you gave to the CRA is wrong or incomplete, you may be able to make a voluntary disclosure. To see if your disclosure qualifies for this program, go to Voluntary Disclosures Program.
This program does not apply to any tax return for which we have started a review.
The CRA will charge a late-filing penalty if you do not file your T1-OVP, 2016 Individual Tax Return for RRSP, SPP and PRPP Excess Contributions return on time. The due date for filing the T1-OVP is 90 days after the end of the calendar year.
The penalty is:
- 5 % of your balance owing
- 1 % of your balance owing for each month that your tax return is late, to a maximum of 12 months
Your late-filing penalty may be higher if CRA charged you a late-filing penalty on your T1 OVP return for any of the three previous years.
Interest is compounded daily on:
- unpaid tax calculated on your T1-OVP, 2016 Individual Tax Return for RRSP, SPP and PRPP Excess Contributions
- unpaid late-filing penalty
CRA calculate interest starting on the 91st day of the following year.
For more information on relief of late-filing penalties and interest, see Information Circular IC00-1, Voluntary Disclosures Program.
Forms and publications
- T1-OVP, 2016 Individual Tax Return for RRSP, SPP and PRPP Excess Contributions
- T1-OVP-S, 2016 Simplified Individual Tax Return for RRSP, SPP and PRPP Excess Contributions
- Information Circular IC00-1R4, Voluntary Disclosures Program
- Information Circular IC07-1, Taxpayer Relief Provisions
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