What Happens if I Contribute More Than My Deduction Limit?

by Tax Guy - Burlington Accountant on January 22, 2011 Print This Post Print This Post

There is a limit on how much you can contribute to your RRSP!

Your annual RRSP contribution limit is reported on your Notice of Assessment or Notice of Reassessment. If you exceed your annual RRSP contribution limit, you are subject to a penalty tax of 1% per month of the amount of excess contributions to your own and your spouses’ RRSP’s.

Administratively, the CRA will not assess the penalty tax unless the over contribution is more than $2,000, which gives many Canadians a little bit of leeway if they make a mistake.

Also note that, if you have unused RRSP contributions on your Notice of Assessment and the amount of the unused RRSP contributions is greater than your RRSP deduction limit then you may be subject to the penalty tax.

The penalty tax on RRSP over contributions should be less than your average tax rate.  Balance the impact of withdrawing the excess contributions over apply future year’s RRSP deduction limits to eliminate the over contribution.

About The Tax Guy...

Dean Paley CGA CFP is a Burlington accountant and financial planner who services individuals and business owners locally, nationally and internationally. Dean has appeared in the National Post, Toronto Star and Metro News.

To find out more, visit Dean's website Dean Paley CGA CFP or connect via Twitter @DeanPaleyCGACFP.

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taffy April 29, 2009 at 10:50 am

What I am amazed at is that nowhere on the notice of assessment does it tell us as taxpayers what to do, to address the over contribution, other than to report it on Schedule 7 of the following year. It also says the excess contributions “may be subject to tax”. There is no mention of having to complete and file additional returns to CRA. I just got dinged with taxes, interest and penalties of about $2K for 2003, 2004 and 2005. Due to a lack of relevant information on the assessment notice from CRA.

Terry February 19, 2011 at 9:15 pm

Is ‘excess RRSP contribution” as mentioned in the Notice of Assessment” the same as ‘excess contribution? Thanks, Tax Guy.

Tax Guy February 21, 2011 at 4:27 pm

Hi Terry,
I assume the phrase is located in the RRSP section of the NOA and so yes they are referring to the same thing.

Terry February 21, 2011 at 11:21 pm

Is ‘unused RRSp contribution/ as per NOA the same as ‘excess contribution? Prior to 1996, the allowed overcontributiion was $ 8,000. i have ‘unused contribution of $7000 + (was on oversight) since 1995. Does it mean 1% interest per month will be applied until I file T1 OVP? what other forms should I file? many thanks

Tax Guy February 22, 2011 at 4:42 pm

Unused contribution room is the amount you can contribute to an RRSP. Excess contribution is the amount by which you have exceeded your contribution limits. You pay the penalty tax on the excess contributions.

Administratively the CRA only applied the penalty tax if you have contributed more than $2,000.

Terry February 24, 2011 at 4:20 pm

I contributed to RRSP in 1991, 1993 and 1994 whcih resulted to “undeducted RRSP contribution” per taxpreparer (or unused per CRA). The contributions were not reported in the tax returns. In 1994 and 1995, I filed sch 7 Unused RRSP Contr”. The amount now is $ 5500 as per CRA. No employment income in 2009 and 2010. what to do- withdraw or do nothing? If i withdraw, can I use T746 and/or use T1 OVP? Thanks.. Pls notify me once you replied.

Tax Guy February 25, 2011 at 9:14 am


The T1-OVP is for over-contributions. You have deductions carried forward you have not used. You can either continue to carry these forward and use them when you have taxable income (you don’t need employment income).

Mike February 25, 2011 at 3:27 pm

Great service you offer! Keep up the good work.

I was a non resident for 2008, 2009 with no taxable income. In 2007 (the last year I filed) I maxed out my contributions and have zero RRSP room. I returned to Canada in 2010 and started working. My company made contributions to a RRSP group policy in my name which totaled $3054 by year end. Will I be penalized for this? Or does the fact that it’s a group policy change things? Should I withdraw the money or do I have any other options?

Tax Guy February 25, 2011 at 3:40 pm

Take a look at How Much Can I Contribute To My RRSP?. Based on what you have said, you have zero RRSP room for 2010.

Mike February 25, 2011 at 4:53 pm

Understood. So regardless of who makes the contribution, my company or me, if the RRSP is in my name it counts as contribution and I will be penalized. So I need to withdraw the RRSP ASAP?

I tried reading the Guide T-4040 but could not find anything useful.

Tax Guy February 25, 2011 at 5:39 pm

NO you do NOT need to withdraw based on what you’ve said. You have NOT over contributed. You will NOT be subject to the penalty tax.

You have deductions that you have not used.

You can use them anytime.

Mike February 25, 2011 at 6:58 pm

Sorry to be a pain but I’m a bit confused. I had no remaining deductions in 2007, was non-resident in 2008 + 2009 so I can’t contribute anything in 2010. Yet, my company did contribute on my behalf.

Tax Guy February 25, 2011 at 7:12 pm

Disregard what I said above. I mixed my responses up. Yes you might withdraw but you will get the contribution room as of January 1st.

cris January 23, 2012 at 2:03 pm

I have over contributing on my RRSP by about 11,000. Do I have to report all RRSP in the year they were purchased or can I keep the receipts and report them on future years so I don;t get penalized. If I do have to report them for this year how do I go about not getting a huge penaalty

Tax Guy January 23, 2012 at 2:11 pm

If you over contributed, you are subject to the penalty. The deduction is different and you can’t deduct an over contribution.

Tree January 24, 2012 at 2:24 am

Great service, thank you!

I overcontributed to RRSP for 2011 by about $3000 due to prior years pension adjustment. As this overcontribution amount is greater that $2000, I will have to pay penalties. How does the penalty calculation work? Will the penalty simply be $3000 (the total excess contribution) x 1%per month x 12months even though the overcontribution started later in the latter part of 2011?

None of the RRSP tax receipts include time stamp of RRSP contribution to help determine the month when the overcontribution started…

Tax Guy January 24, 2012 at 6:47 am

The penalty is 1% per month on the amount over $2,000. Your plan administrator reports your balances to the CRA monthly.

Tree January 25, 2012 at 10:12 pm

Thank you, Tax Guy.

Given that my spouse’s RRSP still has contribution room, is there a way that I could apply my 2011 RRSP overcontribution to my spouse’s RRSP in first 60 days of 2012 ? (I would still have to pay the penalty, but would reduce my spouse’s income tax owing for 2011.)

Or can I avoid the penalty if I apply the excess to the Home Buyers Plan repayment?

Rob January 29, 2012 at 2:40 am

Tax Guy,

my limit for 2011 is 8,700 I’m planning to contribute another 2,300 before February ends to make it 11,000 plus I also have a monthly contribution of 200. Will my contributions from jan to february which is 400 be added to the 11,000? say my total contribution for 2011 is 11,400 by the end of feb… does that mean that I have an excess contribution of 700 dollars and i will have to pay 1% of the 700 dollars monthly as penalty? Will i still get a tax refund if i exceed?

thanks in advance

Tax Guy January 29, 2012 at 9:26 am

You can only deduct your limit plus carryforward from prior years.

Matthew August 18, 2012 at 6:30 am

Hi Tax Guy,

Lets say you use all your RRSP room in 2012. In 2013 can you contribute to your RRSP for that year the amount of RRSP room that you anticipate you will get based on your salary? Do over contributions only get calculated after you file your taxes for the previous year?


Burlington Accountant August 20, 2012 at 6:32 pm


RRSP room is based on the last year’s earned income. So the 2013 RRSP limit is based on 2012 income. Your 2013 income determines 2014 RRSP room and so forth.

As for when they are caught, likely its during the summer (I’ve not had a client caught with this yet!).

Zach January 11, 2013 at 2:14 pm

Hi Tax Guy,

I am in a bit of disarray here as I sit and try to figure out how much I should put into my RRSP’s for 2012. My situation is this:
Say I have a $10,000.00 RRSP deduction limit for 2012 (Line A on the 2012 assessment), and $7,500.00 of unused RRSP contributions available for 2012 (Line B on the 2012 assessment). Am I able to claim the unused contributions from previous years of $7,500.00(B) and the $10,000.00(A) from my 2012 notice of assessment for a total RRSP Deduction limit of $17,500.00 for my 2013 tax year without penalty?

I know I can either contribute $2,500.00 or $10,000.00 more to my RRSP for 2013 but I do not know which value and do not want to over contribute and get taxed for it.


Zach January 11, 2013 at 2:33 pm

To alleviate confusion $17,500.00 for my 2012 tax year and 2011 assessments are what I meant 🙂

Tax Guy - Burlington Accountant January 11, 2013 at 4:59 pm


You have $10,000 carried forward.

You have contributed $7,500 that was no deducted.

Your room is $2,500 PLUS the administrative $2,000 over contribution limit.

Zach January 13, 2013 at 1:01 am

Just as I thought and had not hoped for! It appears I will have over contributed for 2012. What are the penalties for contributing a sum more than the $2,000 over contribution limit for a year? I have read that it’s 1% per month – is that 1% of the whole sum > the $2,000 over contribution limit or the whole RRSP contribution amount for the year? I figure I will be paying either way for my mix up of my over contribution but I am wondering what is the best route to take. Pay the 1% or take out the sum of over contributions I have made and pay the income tax on that sum for 2013?

Sandy January 15, 2013 at 3:29 pm

My spouse is not earning any taxable income since last two years and has unfulfilled contribution room. Can this contribution room be used to offset my excess contribution for the year 2012?

michael January 21, 2013 at 8:57 am

Hi, my scenario is that I want to maximize my RRSP contribution for 2012/2013 and want take advantage of the $2000 over contribution limit to get as much money as possible into my RRSP working tax free for me as soon as possible without being taxed for over contributing. I am quoting #’s from my 2011 tax return:

Actuals 2011 Tax Return
2011 RRSP Deduction Limit: $11605
2011 RRSP Contrib’s Deducted: $11605
2011 Unused RRSP Deduction Limit: $0

Line A – 2012 Deduction Limit: $11485
Line B – Unused RRSP Contrib’s Available for 2012: $11887

2012 RRSP Contributions: $5603

2013 – Planned Contrib Jan – Feb:$1000

By my contributions I would have over contributed by $979 and if I could scrape up another $1020 and contribute it I would have an over contribution of $1999 and still not be taxed. This assumption is based on earning the same amount in 2013 as in 2012 so that I would generate the same amount or more RRSP deduction Limit for 2013 to apply the 2013 contributions against.

Can you please review my strategy and offer some comments?

Bern Fitzmichael January 22, 2013 at 3:48 pm

Hi there – I was hoping to run something by you with respect to an overcontribution which I did a few years ago.

In September 2010, I mistakenly I made a contribution to my RRSP thinking that the RRSP amount was based on that year’s expected income. I had some prior unused room so my overcontribution amount ends up being like $18k (this is the line that reads “unused contributions available for 2011”). So I was 4 months early (Sep 1 2010 to Dec. 31 2010) from when my 2011 contribution room would be calculated based on my 2010 wages, which did end up being the max amount of like $22k and therefore, I was fine once I crossed over that time. So as time passed from 2010 into Jan 1, 2011, I always assumed that I would quickly get back “onside” and that the temporary 4 month early contribution wouldn’t be a big deal. A few years later, I still find myself worrying whether the CRA will one day come back to me with something down the line and whether the 1% penalty might have kept accruing over time. Which would be a big hit!

So my question is, do you think I am OK to just have waited those 4 months and then have gotten back onside? Does the penalty keep going on and even even after getting onside? Or is the max liability I could ever owe if CRA wanted to get back to me was 1% x 4 months x $18K? Or is it 1% x 28 months x $18k, which would really not be great….

Please let me know what you think.

Thanks for your help.

Tax Guy - Burlington Accountant January 22, 2013 at 5:01 pm

Hi Bern,
It would be only the 4 months. However, you do need to file a T1-OVP and remit the penalty tax by self-assessment and there “may” be some interest on top of the penalty tax.

If you would like me to file the T1-OVP for you, contact me at my office at 289-288-1206.

Bern Fitzmichael January 23, 2013 at 1:00 pm

great, thanks for your help. Let me think about if I will go ahead and do it and will let you know… seems to me like its one of those things that maybe is worth taking the risk and letting it be and chances are no one will ask questions about it. it’s a small amount relatively (penalty would be about $650 ($18k x 4%). And it was a mistake made, not trying to deceive them! Not great either way to pay the 650, but then again if it’s something that will permanently solve the problem, then am maybe OK with just paying it. Then there is some interest but assuming CRA uses prevailing interest rates, guess the number wouldnt be too large.

To me the big relief is that it’s just on those 4 months and that the penalty doesn’t continue until today…

Tax Guy - Burlington Accountant January 27, 2013 at 10:07 am

Be warned that you can get in some hot water for failing to file. It should not be taken lightly small amount or not. You have to be mindulf of the difference between tak planning (structuring affairs to reduce income taxes) and tax evasion (purposefully failing to report income or pay taxes). The former will get you penalized while the latter is a criminal offence.

Kellie February 3, 2013 at 6:34 pm

Hi there,

I maxed out my RRSP contributions in 2011 based on my 2010 NOA. However, I have since been made aware that I would be considered non-resident for tax purposes in 2011. In addition to filing an adjustment to my 2011 return to amend for my residency status, do I also need to include over-contribution forms and do I arrange to de-register these excess contributions?


AC February 6, 2013 at 8:31 pm

I am confused and need your help…
This is the info in my Notice of Assesssment

RRSP deduction limit 2011 $12,569
Minus: Allowable RRSP contributions deducted for 2011 $12,051
Unused RRSp deduction limit at the end of 2011 $518

RRSP deducton limit for 2012 $11,932 — This $11,414 (my 18%) + those $518 — This is (A) in the NOA

Now.. in (B) I have $900 of unsuded RRSP contributions available for 2012

Q#1 What was the maximum amount I was allowed to contribute….? $11,414 or $11,932
Q#2 Those $900 should be counted as my 2012 contributions? Let’s say I conributed $10,000, my gran total would be $10,900? or $10,000?

I am not sure what to handle those $900 that are now in my (B).


Tax Guy - Burlington Accountant February 6, 2013 at 10:38 pm

Your limit is A – B.

Paul February 6, 2013 at 8:51 pm

I just received a re-assessment that lowered my RRSP deduction limit by $1,000.

The only problem is that I already contributed to my RRSPs in 2012 based on the original assessed amount.

It doesn’t seem fair that the CRA can now ding me with penalty interest when I acted on their original assessment amount.

Tax Guy - Burlington Accountant February 6, 2013 at 10:41 pm

THere is a $2,000 administrative barrier before they apply the penalty.

With respect to being fair, it is the taxpayers responsibility to file their return correctly. Any issues resulting from a reassessment would be the result of the taxpayers own error.

Doug February 7, 2013 at 6:34 pm

I contributed $21,000 to my RRSP last year between March to December, and have also contributed $8,000 for the first 60 days of 2013. My limit per the 2012 tax assessment was $24,686 so the amount is $4,314 more than I can include in my 2012 taxes. I know that I could simply include the $8,000 in my taxes for 2013 but because I retired at the end of December my income in 2013 will be very much less than in 2012. I really want to maximize the deduction on the 2012 income. Can I split the $8,000 between my 2012 and 2013 taxes, i.e. $3,686.00 for 2012 bringing me to the maximum and the remainder of $4,314 on the 2013 income. Will I be subject to penalty if I do?

Tax Guy - Burlington Accountant February 8, 2013 at 9:07 am

Hi Doug,
You can carry forward the excess amount of $4,314 to your 2013 tax return. As long as you generate enough RRSP room in 2013 you can avoid the penalty tax.

You will need to have $12,856 of earned income in 2013 to avoid the penalty tax. If you think you can’t use that amount, go to the plan provider and tell them you over contributed and you want to withdraw the excess … But don’t delay!

Bill February 18, 2013 at 2:56 pm

I had unused contributions to my RRSP of 8,400 for contributions made prior to 1994. In 1994, I contributed 1,500 bringing the total unused to 9,836. Between 1995 and 2002 I made no further contributions but claimed deductions gradually reducing the balance of the unused contributions to 6,000. In 2003, I contributed 5,000 and deducted that contribution leaving my balance of unused at 6,000. I have since reduced the balance to below 2,000. Am I in a penalty position for any of the years 1994 to 2003?

Melinda February 28, 2013 at 11:46 pm

I had overcontributed $1,200 in error (a part of a large $15,000 one-time contribution in Feb 2013). As there is no penalty for overcontributing below $2,000, what is best for me: claim all $15,000 on my 2012 tax return (which would mean an $1,200 overcontribution) or claim $13,800 (thus reaching my limit) for 2012 and add the remaining $1,200 to my 2013 return?

Tax Guy - Burlington Accountant February 28, 2013 at 11:54 pm

Hi Melinda,
You would report the full $15,000 on your tax return. However, you could only deduct up to $13,800 for 2012. The remainder would be carried forward to 2013. Assuming you have earned income in 2013, you should be just fine.

Amer Lion March 15, 2013 at 8:25 pm

Hi Tax Guy,
I am confused and need your help…
This is the info in my Notice of Assesssment

RRSP deduction limit 2012 = $38,137
Unused RRSp contribution available for 2012 = $25,570
I made a contribution of 12,772 for the reminder of 2012 plus 2,693 for Jan & Feb 2013 and for 2012 tax return, I have plan to claim about 28,000 from my unused contribution. I know that I am over the limit, but the CRA guy sayed (over the phone) you should be ok. Please advice?

Clarence Ronchiadin March 29, 2013 at 4:26 pm

Born in 1942, I received my income tax statement saying I was over the limit on my RRSP and I was Fined by the tax dept. Is my financial planner responsible for the amount I payed out, This happened in 2010 -2011. He said he would look after it . Later I received the letter from the tax dept, I had to pay a fine to a tune of $400.40 dollars. I did not create this problem, my planner did. I contacted him and getting not much response. Please advise Thank-you.

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