I have a client who unintentionally overcontributed ~$13k to his RRSP (simply through ignorance; young guy who had a windfall and didn’t know about limits). After reading through the T3012A instructions, it seems that I’m supposed to file his return as normal and ask for permission to withdraw and have the adjustments made.
What happens from here? Do I declare the overcontribution as such on his return? Does he still have to pay penalties, etc.? Once it’s processed, and he withdraws the funds, will he get those back?
Then withdraw the excess as soon as possible. By default, his financial institution will withhold some taxes on the RRSP withdrawal. He can file a form with CRA asking to be exempt from the tax withholdings, but it can take six month for CRA to approve it, during which he still have to file T1-OVP and pay the related tax, so it’s often better to just withdraw asap with withholdings, and get those back when you file your next year’s T1
On the next year’s T1, you will have to report the T4RSP for the withdrawal. In addition, so that your client doesn’t pay tax on an RRSP withdrawal he didn’t even get to deduct, you will complete form T746, which will provide a deduction for the amount of the excess RRSP that was withdrawn.
Is that 13K over his 2022 limit or over the calculated 2023? Also, I wonder if he might be able to transfer a portion of it to a First Home Savings Account?