I over-contributed to my RRSP and CRA is charging me a penalty — can I get it reduced?

RRSP over-contributions are subject to a 1% per month penalty tax on the excess amount above the $2,000 cumulative lifetime buffer. This penalty is assessed under Part X.1 of the Income Tax Act and is a federal matter. Once the excess is withdrawn from the RRSP, the penalty stops running (though the withdrawal itself is generally included in your income for the year).

If you over-contributed and the excess has already been withdrawn, or if the over-contribution arose from a reasonable error, you can apply to CRA for relief from the penalty using CRA's prescribed process. CRA has discretion to waive Part X.1 penalty tax when the over-contribution was inadvertent and the excess was withdrawn promptly once you became aware of the problem.

To support a waiver request, document the timeline of events, explain why the over-contribution occurred (for example, an employer RRSP contribution you were unaware of), and show that you acted quickly to fix the situation. The sooner you withdraw the excess and request relief, the stronger your case. If CRA denies relief and you believe the decision is unreasonable, you can apply for judicial review in Federal Court.