RRSP Overcontributions

Tax Topics
1

Looking for a simply outline of what to advise a new client:

In 2024, client overcontributed for the first time in the amount of $1,700.
In 2025, client overcontributed again in the amount of $6k.

Nothing was done by the client except right now in which I had him stop contributing to RRSP.

My understanding is for the client not to withdraw the funds on their own.
The amount from 2024 is safe due to the $2,000 once in a lifetime rule.

In 2025, which we haven’t filed yet, the best is to complete a T1OVP in the amount of $6k (or even $5700 since we have $300 left before we hit the $2k limit)

Do we also have the client send in a T3012 and get it approved by CRA and then have our RRSP provider withdraw the funds tax free?

2

Not a complete outline of the issue, as they may or may not have excess contributions subject to Part X.1 tax. Review the T1-OVPS to better understand how the tax is assessed, as it depends on their RRSP Deduction Limit, when (which month) they made those contributions, and, finally, whether there are withdrawals.

3

sometimes it is easier to just withdraw the 5700 immediately (yes, tax will be withheld) and use form T746 to indicate it is a withdrawal of over contribution; T3012 is used to avoid the tax deducted, but can take longer for the form to be completed by the FI and then to get approved by CRA; for 5700, it may be worth using the quicker option.

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4

so the client actually did a RRSP withdrawal in 2025 in the amount of 70k. Does that mean I would need to suggest a T746?

Would this need to be completed and submitted to CRA prior to filing the 2025 Tax return?

5

T746 is completed as part of the 2025 tax filing; complete the form and it is efiled with the 2025 taxes

6

so i’m looking into the T746 - please correct me if I’m wrong but if the client simply tells the FI to withdraw money from the rrsp - they will receive a T4RSP with tax withheld.
If this isn’t a big deal to the client, then next year, we would incorporate the T746 into the filing with the T4RSP slip received from the FI.

If the client wants the withdraw without tax being held, then we need to do the T3012 - but this adds a lot of time to the process.

Now the other question is the T1OVP - do this form need to be completed no matter what?

7

Correct; T1OVP technically yes, needs to be completed; for the amount of 5700, I would wait for CRA to request it; often they may not for the small amount of over-contribution; I advise client that CRA may or may not request T1OVP later.