Excess Contributions

The rules allow you to contribute more to your RRSP than your contribution room. This is intended as an administrative convenience to address minor over-contributions which may occur by way of oversight. However, a limit of $2,000 exists because the government foresees potential abuse. Any over-contribution in excess of $2,000 is subject to a self-assessed penalty tax of 1% per month until the balance is brought onside.

Please note that, for the first time, CRA is showing interest in pursuing excess contribution situations beyond the $2,000 limit. They have been auditing and assessing in this area over the last year (2007).

You bring the over-contribution onside either by:

• Withdrawing the required amount tax-free from your RRSP
• Waiting for a new year's contribution room from earned income

Article updated: Dec 07