Unused RRSP Contribution and Negative Available Room

T1
1

I have a client and here is the situation:

RRSP Deduction Limit for 2020: 13,000

Minus Unused contributions Previously Reported And Available To Deduct For 2020 14,000

Available Contribution Room For 2020 is NEGATIVE (1,000)

Client Makes 120,000k Salary

Can I enter the full 14k in tax cycle in the RRSP field Contibutions Prior to RRSP Unused contributions (the first box in RRSP form) and enter on Line 1 of the RRSP form 13k? Is that right? or do I enter 0 for unused. if I enter the 14k the tax refund goes up by 6k

2

I believe you are on the right track. Once you make the entries, your client should have a deduction RRSP deduction of $13,000 for 2020, and unused RRSP’s of $1,000 plus any current year contributions to carry over to 2021.

Once taxes are finalized, I would check 2021 RRSP room to ensure that Unused RRSP’s do not exceed RRSP room by more than $2,000. An overcontribution over $2,000 is subject to penalty tax of 1% monthly and would require a T1OVP return for 2021.