June 16, 2023

Successfully Managing RRSP Overcontributions: The Steps That Make the Journey

HST registration

June 16, 2023

I recently, successfully, helped a client who had an RRSP overcontribution in excess of $100,000 obtain a waiver of some very hefty penalties  (Ed: He means to say excessive). If you have overcontributed to your RRSP, you’re subject to a 1% per month penalty on the overcontribution. In a situation like this, it could be $1,000 per month until the overcontribution in removed. If you don’t realize it, this could go on for a while as the CRA is generally slow to inform taxpayers and it can be a couple of years before they get the first notional (Ed: arbitrary) assessment of the T1OVP. By that point, there is very little that can be done other than prepare and submit their own T1OVP forms, and hopefully reduce the balance owing. Getting absolute relief is a very high bar.

The T1OVP is how you determine and report the amount of penalty owing, and it is not the easiest form to follow or complete, especially in cases where the overcontribution has been going on for several years. Unlike a personal return, the T1OVP is due 90 days after then of calendar year, which is to say March 31 in non-leap years, and March 30 in leap years. So, time is of the essence in recognizing the overcontribution, filing the return, and requesting relief.

It was a bumpy ride to get here though.

As a surprise resolution to a long-standing pension transfer fight, the taxpayer’s former employer had sent the money to the RRSP directly, and without confirming that that there was sufficient room. These payments were included on a T4A and sent directly to his RRSP. This was outlined in the letter to the fund company.

It’s important to note that when you claim this deduction, and file the T746, there is a 100% chance that the CRA will issue a post-assessment review, so it’s important to have all of the RRSP statements for the year, which shows the money into and out of the account, as well as the RRSP contribution receipts. Accountants, if you’re doing all this work for the T1OVP, then that working paper should suffice for the review. The review passed with flying colours (Ed: was chuffed).

In my cover letter for the T1OVP, I requested that the penalty be waived. The CRA acknowledged the waiver request in June 2022, and assessed the T1OVP in early July. As we came to the 90-day deadline, I filed a Notice of Objection, citing ITA 204.1(4) which allows the Minister to waive the penalties where the overcontribution is due to reasonable error, and reasonable steps are being taken to correct it. I included the same documentation I sent for the T1OVP. The basis for the objection was that initial waiver request was pending and the objection was being filed to protect the taxpayers rights. The initial request for relief was denied in early November, and pending the outcome of the objection, the client was considering a second review of the waiver. So, we waited.

Beyond the objection, and second review of the waiver, the client could have proceeded to the Tax Court of Canada and self-represented under the Informal Process

The day before the strike, the objection was assigned (Ed: I do like the CRA progress tracker) and the appeals agent reached out to me for some additional information. In this case, the actual RRSP contribution slips to confirm the contributions weren’t a transfer under ITA 60(L)). When they came back from the strike, we had a good chat about how the overcontribution was not due to the taxpayer (reasonable error), and we corrected the overcontribution by the end of the year (reasonable steps).  

We’ve since received written confirmation that the waiver request has been granted. Chalk up one in the win column.

To summarise dealing with an overcontribution:

Please note that this only touches on a T1OVP overcontribution. TFSA overcontributions are a separate beast, but should be removed immediately, and no contributions should be made by a non-resident.


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Brian K. Hlady

Chartered Professional Accountant

CPA Canada In Depth Taxation

Xero Certified Advisor



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