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Originally posted by love_n_peace

RRSP QUESTION

I HAVE MISTAKENLY OVERPAYMENT SPOUSAL RRSP OF $3000 LAST (2012)YEAR.

CAN I CLAIM THIS AMOUNT AS RRSP BOUGHT THIS YEAR (2013)? AND GET A TAX CREDIT.

WILL THEY CHARGE ME PENALTY FOR THAT?

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All of the above are correct. Here is a little help. Since you over contributed into the spousal RRSP and claimed the Income tax rebate at the going rate, you must pay back when you get the RRSP money back. So, there is a deduction out of the $3000.00, which will be at the slab rate that it falls into at the top level. Now you know you will not get all of the $3000. and you will also need an authorization from CRA. See below.

You will have to submit a Amendment to the files. If you know how, then, you can do it by yourself. Otherwise I will provide you a little help at the bottom of this write up.

You can over-contribute to your RRSP by up to $2,000 without being penalized. However, you cannot claim a deduction for the excess amount.

If you over-contribute by more than $2,000, you are subject to a one per cent penalty tax for each month you are in excess of that. You have to complete a T1-OVP Individual Tax Return for RRSP Excess Contributions to calculate the amount of the over-contribution and penalty tax. This form must be filed, and the tax remitted, within 90 days from the end of the year (March 30, 2013 if there was an excess amount in the plan at the end of a month in 2012.)

You can request a waiver of the penalty tax if: The excess amount arose as a consequence of reasonable error; and you can demonstrate that you are taking reasonable steps to eliminate it. So, submit the T1OVP. You can also let the CRA know that you discovered that at the time of filing the return on 30th April 2013. ( The day you filed the return)

If you discover that you have over-contributed, you should try and withdraw the excess amount as soon as possible. Although you must include the withdrawal in income on your tax return, you can claim an offsetting deduction as long as you do so within the required time frame and the following conditions are met:

You are reasonably expected to be able to claim a deduction for the contribution, either in the year you made the contribution or the year before; and you did not make the contribution with the intention of later withdrawing it and deducting the offsetting amount. This is happening in your case. That is one tick mark against you.

You can ask the Canada Revenue Agency (CRA) to certify the amount of the excess contribution using Form T3012A. The financial institution will release the funds without withholding tax with this certified form. This is the form that you will need from them. And they will not release this to you for the withdrawal of the Excess from the RRSP and the company that is holding the money, till they get the TAXES Back from you.

Without a T3012A, you can still withdraw the excess amount but the financial institution will withhold tax. Use Form T746 when you file your tax return to claim the offsetting deduction and a credit for the tax withheld.

It is like filing your tax return all over again with the $3000.00 less in deduction.

So be guided by it.

FH

T1 OVP : http://www.cra-arc.gc.ca/E/pbg/tf/t1-ovp/t1-ovp-12e.pdf