TFSA & RRSP Over Contributions

Caitlyn Hoffman
Oct 14
2 min read

💡 When Good Savings Go Overboard: What to Know About RRSP & TFSA Over-Contributions

Saving for your future is always a good idea, until you accidentally save too much. Each year, Canadians are surprised to learn that contributing a little extra to their RRSP or TFSA can actually cost them money in the form of CRA penalties.

At Hoffman Professional Services, we see it all the time. Clients with the best intentions who go just a bit over their limits and don’t realize the CRA keeps close track of those numbers.

Why Over-Contributions Happen

It’s easy to slip up. Maybe you contributed through more than one bank, or you didn’t realize your payroll RRSP deductions already counted toward your limit. With TFSAs, the confusion often comes from withdrawals — people assume that taking money out means they can immediately put it back in, but in most cases, you must wait until the next calendar year.

What the CRA Says

For RRSPs, you get a small $2,000 “cushion.” Anything beyond that is charged a 1% monthly penalty on the extra amount until it’s withdrawn or new room opens.
For TFSAs, there’s no cushion at all — CRA applies a 1% monthly penalty on the highest excess balance for each month you’re over the limit.

Those penalties might sound small, but they can add up fast if the problem isn’t caught quickly.

How to Fix It

The good news: over-contributions can almost always be fixed.

For RRSPs, you can withdraw the extra amount and file a short CRA form to reduce or eliminate withholding tax.

For TFSAs, a quick withdrawal will stop further penalties from building up.

The key is acting quickly and keeping documentation of your withdrawals.

Stay Informed, Stay Ahead

Before contributing, always check your CRA My Account to confirm your available room, especially if you’ve contributed to multiple institutions or changed jobs recently. A few minutes of checking now can save you a surprise bill later.

Download Our Free Guide

We’ve put together a simple, plain-language guidebook that walks you through:

How over-contributions happen
CRA penalties and how they’re calculated
How to fix the issue
How to avoid it in the future

Hoffman Professional Services