The Registered Retirement Savings Plan is designed to help Canadians save for retirement. The government allows eligible Canadians to contribute a certain amount each year. This amount is deducted from your income for tax purposes. Additionally, gains made within an RRSP are not taxable until the funds are withdrawn.

There are two different things to keep track of when you add funds to your RRSP —

• Deduction limit: The amount you earn each year to contribute to your RRSP. For 2023, the RRSP deduction limit is 18% of your income, up to $30,780. This is standard for all eligible Canadians.
• Unused contributions: The total amount of unused contributions that you have from previous years.

Find your RRSP deduction limit and unused contributions

The most reliable way to check your current year deduction limit and your unused contributions is to log in or register for an online account with the Canada Revenue Agency. Alternatively, you can also look for this on your most recent Notice of Assessment.

What to do if you over-contribute to your RRSP

If you believe you’ve over-contributed to your RRSP, the first thing to consider is the possible penalties that may be applicable. Generally, you have to pay a tax of 1% per month on excess contributions that exceed your RRSP contribution limit.

If you determine penalties may be applicable on your over-contribution but you would like to appeal the penalties, you’ll need to show the CRA that the excess contributions were an honest mistake and that you’re taking steps to withdraw the over-contributions. This involves writing a letter to the CRA asking for a waiver of the penalties. You will also have to withdraw the excess funds from your RRSP.

You have a couple of options for withdrawing the excess amount from your RRSP:

1. Withdraw the amount to your bank account or complete an internal transfer to another Wealthsimple account. Withholding tax will be applicable here according to the amount and your province of residence.
2. If you contact our support team, we can process a T3012A form to withdraw the over-contributed amount without withholding tax. This is an appeal to CRA and is a lengthier process that will be explained in full when you reach out.