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what happens to the unused over contributions when it's time to convert to RRIF
April 15, 2018
5:47 pm
tc
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I have about $800 unused over contributions from years back with no hope of deducting it before I turn 71.
What happens to the $800 when I convert the RRSP to RRIF?
thanks

April 15, 2018
6:07 pm
Norman1
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Are they actually overcontributions (above RRSP contribution room) or just undeducted contributions within one's RRSP contribution room?

For overcontributions, I found earlier that Income Tax Act paragraph 146(8.2)(c) allows a special offsetting deduction for the withdrawals of overcontributions only within certain time windows.

April 15, 2018
7:30 pm
tc
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tks Norman1
yes it is actually an over contribution due to arithmatic error. I didn't have to pay any penalty as it is less than 2000.00.
My question is : what happens when I just leave it there until conversion to RRIF?
I checked out the related forms to take it out,looks complicated.

April 15, 2018
8:00 pm
Kidd
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Hi tc.

I am retired, i have a rrif and i am in my late 50s.

Because i claim an income of, investments, pension, anuity and a rrif, i believe any unclaimed rrsp contributions could be deducted from such income. I have thousands of dollars of rrsp room that i will never use BUT if i did make the rrsp deposit, i would claim the deduction.

Added edit.... if you do NOT claim it as a deduction. You will be double taxed on that money. If you withdraw the money from a rrif, it will be income and taxed. Unless you notify cra and ask to get that money back.

April 15, 2018
8:51 pm
Norman1
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tc said
tks Norman1
yes it is actually an over contribution due to arithmatic error. I didn't have to pay any penalty as it is less than 2000.00.
My question is : what happens when I just leave it there until conversion to RRIF?
I checked out the related forms to take it out, looks complicated.

Are we certain that the $800 is still an overcontribution?

If I overcontribute for 2010 by $800 in October 2010, the $800 is an overcontribution for the rest of the year, October, November, and December.

Starting next year (January 2011), the $800 could be covered by my 2011 RRSP contribution room and could no longer be an overcontribution. sf-smile

April 15, 2018
9:49 pm
tc
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Norman1 said

tc said
tks Norman1
yes it is actually an over contribution due to arithmatic error. I didn't have to pay any penalty as it is less than 2000.00.
My question is : what happens when I just leave it there until conversion to RRIF?
I checked out the related forms to take it out, looks complicated.

Are we certain that the $800 is still an overcontribution?

If I overcontribute for 2010 by $800 in October 2010, the $800 is an overcontribution for the rest of the year, October, November, and December.

Starting next year (January 2011), the $800 could be covered by my 2011 RRSP contribution room and could no longer be an overcontribution. sf-smile  

I should have been clearer in the beginning. After the overcontribution was made I retired and had no more earned income for the following year's contribution room, so the $800 still shows as unused contributions on the tax assessment.
Further research on CRA website says I can leave it in the plan.
What happens when I convert everything to RRIF?
Can I deduct the $800 off the RRIF withdrawal? as Kidd suggested above.
Tks Kidd and Norman1

April 16, 2018
1:20 am
Kidd
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https://www.caatpension.on.ca/en/retired-members/other-income-sources/rrsp-and-personal-savings

After doing some reading... the age 71 is a key factor. You can no longer make an rrsp contribution. So you MUST get that money out "without" paying tax on it. To do so, see the link below.

https://www.canada.ca/en/revenue-agency/services/forms-publications/forms/t3012a.html

You paid tax on the $800 when you made it, if you withdraw it from your rrif you will pay tax on it again. So double the taxation.

April 16, 2018
9:09 am
Norman1
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One cannot make any further RRSP contributions after age 71. But, one can still use the RRSP deductions for contributions made before age 71 that one had RRSP contribution room for and were not previously deducted.

T3012A can only be used to "undo" RRSP overcontributions under certain conditions listed on the back of the form. This is one of them:

• You or your spouse or common-law partner will receive the refund of contributions from an RRSP, PRPP or SPP:

– in the year you made the contributions;
– in the following year; or
– in the year that we sent you a notice of assessment or notice of reassessment for the year you made the contributions, or in the following year.

April 16, 2018
9:29 am
Norman1
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tc said

I should have been clearer in the beginning. After the overcontribution was made I retired and had no more earned income for the following year's contribution room, so the $800 still shows as unused contributions on the tax assessment.
Further research on CRA website says I can leave it in the plan.
What happens when I convert everything to RRIF?
Can I deduct the $800 off the RRIF withdrawal? as Kidd suggested above.
Tks Kidd and Norman1  

Does your tax assessment for 2016 confirm that there is no contribution room? Does it say this?

RRSP/PRPP deduction limit for 2017 0
Minus: Unused RRSP/PRPP contributions previously reported and available to deduct for 2017 800
Available contribution room for 2017 (800)

If RRSP/PRPP deduction limit for 2017 is not zero, then one can just deduct the $800!

Otherwise, I don't think you can deduct the $800 unless you apply with T3012A and CRA approves (as Kidd mentioned) or can use T746. However, both require the withdrawal to be made by (a) the year after the overcontribution was made or (b) the year after the notice of assessment/reassessment for the year the overcontribution was made.

One may have to discuss the situation with CRA to see if something else can be done for cases where one had procrastinated. sf-frown

April 16, 2018
11:25 am
Bill
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I agree that if it's past the limits Norman1 referred to in post #8 you're stuck, can't get it out (either from RRSP or RRIF) without it being included in income, no offsetting deduction - at least from what I can see. So when you overcontribute up to $2K you have to remember to deduct it in the year you cease to have employment income or else take it out within a year or so of ending employment income, else you get double-taxed.

April 16, 2018
9:43 pm
Norman1
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A notice of reassessment for the year that the RRSP overcontribution was made would open a new window for a T3012A or T746 to be used.

Could one ask CRA nicely to "reassess" that year? sf-surprised

Maybe one could find 50¢ of interest received that year for which no T5 slip was issued and was consequently overlooked?

April 17, 2018
5:11 am
Bill
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Maybe there's a remedy as Norman1 suggests:

https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/change-your-return.html

But I think CRA ignores amounts under a dollar or two, so I'd suggest your change be more than 50 cents.

April 17, 2018
8:24 am
tc
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guys
tks for the info and 'suggestions', but cra still has the final word

"In addition, it has to be reasonable for us to consider that at least one of the following conditions applies:
• you reasonably expected to be able to fully deduct the RRSP, PRPP and SPP contributions for the year you made the contributions or the immediately preceding year; or
• you did not make the unused RRSP, PRPP or SPP contributions intending to withdraw them and deduct an offsetting amount."

looks like I'm stuck with the double taxsf-frown

April 17, 2018
6:16 pm
Norman1
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tc said
guys
tks for the info and 'suggestions', but cra still has the final word

"In addition, it has to be reasonable for us to consider that at least one of the following conditions applies:

• you reasonably expected to be able to fully deduct the RRSP, PRPP and SPP contributions for the year you made the contributions or the immediately preceding year; or

• you did not make the unused RRSP, PRPP or SPP contributions intending to withdraw them and deduct an offsetting amount."

looks like I'm stuck with the double taxsf-frown

I think you satisfy both conditions:

  1. You had expected to be able to deduct the entire RRSP contribution made. Just that an arithmetic error was made and you ended up contributing $800 too much.
  2. I don't think you purposely overcontributed and planned to use T3012A or T746 to get the special offsetting deduction to "undo" the contribution.

Some people used to overcontribute on purpose when interest rates were much higher. Overcontribute by $1,900 and then maintain the overcontribution for years. Way back when savings accounts paid 7% per annum interest, that would be an extra $133 a year in the RRSP.

April 17, 2018
6:40 pm
Bill
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Norman1, I'm not sure the first condition has been met. If you overcontributed in error, your NOAs for following years would show the undeducted amount. The fact you never undercontributed in a later year to remove the overcontribution carryforward amount strongly suggests you did it on purpose in the first place (as you indicate many people did to earn extra sheltered income for a while). Your problem is you just forgot to deduct it in the last year you earned contribution room.

April 18, 2018
6:13 pm
Norman1
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RRSP contributions don't have to be deducted in the year one earned the contribution room to deduct them. Since earned contribution room also carries forward, the undeducted contributions can be deducted in any future year.

I don't think tc had the opportunity to undercontribute in a future year. tc retired after that $800 overcontribution was unintentionally made. sf-frown

Without triggering a reassessment, the only other way I can think of is to somehow earn $800 of RRSP contribution room before age 71. It would require about $4,450 of earned income.

April 28, 2018
3:01 pm
Norman1
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One continues to earn RRSP contribution room after age 71, when one has to convert RRSP to a RRIF or an annuity, if one continues to have earned income: sf-smile

Globe & Mail: A clever way for working seniors to beat the taxman
CIBC Wood Gundy: Earned Income After Age 71: Consider Overcontributing

Can't use the after-71 room to contribute further to one's own RRSP. But, one can use the room to contribute to the RRSP of a spouse, who is not 71 yet, or to take care of past overcontributions to one's own RRSP.

For tc's situtation, opportunities to deduct the $800 overcontribution won't stop at age 71.

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