Overview

The Registered Retirement Savings Plan (RRSP) is designed to help Canadians save for retirement. The government allows eligible Canadians to contribute a certain amount each year. Contributed amounts can be 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 Additionally, gains made within an RRSP are not taxable until the funds are withdrawn.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 annual limit is 18% of your earned income in the previous year, up to the dollar limit for the tax year. Your deduction limit includes the annual limit and any unused deduction room from previous years.
• Unused contributions: the total amount of contributions made in previous years that have not yet been claimed as tax deduction.

Find your RRSP deduction limit and unused contributions

The most reliable way to check your 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.

If you file your taxes with Wealthsimple tax, you’ll be able to see your contributions and your unsued contribution room for the current period in your RRSP account.

Calculating your contributions

Every Wealthsimple RRSP account tracks the total contributions you’ve made during the current contribution period.

This number includes:

• Contributions into any RRSP account at Wealthsimple
  • If you have more than one RRSP account at Wealthsimple, this number is the total amount of contributions made to all Wealthsimple RRSPs.
  • If you have a Spousal RRSP, this number includes any contributions you made there, (even though the funds are going into your spouse’s account)
  • If you have a GRSP, this number includes your contributions and any contributions made by your employer through a matching program.
    
    
• Deposits in USD, converted to CAD
  • If you make a contribution in USD, the contribution amount depends on the FX rate when the transaction was initiated.
    
    
• Money earned from Wealthsimple offers or promotions, such as referral rewards, cash back, or contribution matching.

This number does not include:

• Contributions you made during previous contribution periods
• Contributions you made into RRSP accounts outside of Wealthsimple
• Withdrawals you made during the current contribution period
• Non-taxable transfers from a pension plan or a transfer from a LIRA account
  
  
• Transfers from one RRSP to another
  • If you moved money from an RRSP at another institution to your Wealthsimple RRSP, it does not count as a contribution.
    
    
• Growth within the account
  • Interest, dividends, and capital gains earned within any RRSP are tax-sheltered and do not count as contributions 

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.