Registered Retirement Savings Plans - Refunding Undeductible Contributions
Occasionally, taxpayers find themselves in a position of having put too much money into their RRSPs.
Contribution limits can be complicated to figure out - that is why CRA provides this information to all taxpayers on the face of their annual personal tax assessment notice.
An additional $2,000.00 of contributions is tolerated, to provide room for some degree of error. However, since the investment income of all RRSPs is tax-exempt, to avoid overcontribution abuses there is 1%-per-month penalty for overcontributions beyond $2,000.00.
Consequently, in such cases it is necessary to obtain refund of the overcontribution. The CRA-prescribed form to accomplish this is the T3012, and is available on the attached link.
Note that taxpayers can always get their money out of RRSPs - but in the case of an overcontribution, they would of course wish to avoid paying tax on such refund, since they would not have deducted it in the first place. This, unfortunately, would be the result if a formal application process is not undertaken.
The T3012 form is complicated to fill out, and subject to a high degree of error. Professional assistance should be obtained if there is the slightest concern on this matter.
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