Penalty Taxes on RRSP and TFSA Over-Contributions

The Canada Revenue Agency (CRA) charges a penalty tax of 1% per month on excess contributions to your RRSP or TFSA, even if the over-contribution was unintentional.

RRSPs include a $2,000 lifetime buffer before penalties apply, but TFSAs offer no such grace amount. Any TFSA over-contribution is immediately subject to monthly penalty taxes.

Many taxpayers discover the issue only after receiving a CRA letter, sometimes years after the fact, by which time penalties and interest may have compounded substantially.

When CRA May Cancel or Waive Penalties

CRA may grant relief from over-contribution penalties if:

• The excess contribution resulted from a reasonable error; and
• The excess amount was withdrawn without undue delay.

Relief is discretionary and must be supported by a clear narrative, relevant evidence, and legal analysis.

How We Help

Kirshen Tax Law represents clients at every stage of an RRSP or TFSA over-contribution issue. Our services include:

• Coordinating with accountants to file T1-OVP or RC243 returns;
• Preparing voluntary disclosures;
• Filing notices of objection;
• Submitting relief requests; and
• Seeking second-level reviews or judicial review if relief is denied.

We assist clients whether the error originated with the taxpayer, their financial institution, or the CRA.

Why Work With Kirshen Tax Law

We’ve resolved dozens of RRSP and TFSA over-contribution matters, ranging from minor filing issues to significant reassessments involving large penalty amounts. Our legal strategies focus on minimizing or eliminating penalty taxes wherever possible.

Proven Results: TFSA & RRSP Relief Requests

We’ve successfully defended clients in RRSP and TFSA over-contribution cases, helping eliminate penalty taxes through the CRA’s relief program. We’ve also reversed incorrect non-resident assessments and resolved over-contribution reassessments at the objection stage, resulting in full relief from interest and penalties.

See examples of successful CRA RRSP& TFSA Relief requests here.

Book a Free Consultation

If you’ve been hit with RRSP or TFSA over-contribution penalties, we can help. Contact us today for a free consultation and we’ll assess your situation, explain your options, and advocate for the best possible outcome.