Editor’s Note: from http://www.theglobeandmail.com/
The deadline for making an RRSP contribution that can be deducted on your 2010 tax return is March 1, 2011. If you turn 71 in 2011, you must convert your RRSPs into a form of retirement income before the end of the year or be taxed on the fair market value of the plan. Be sure to discuss your options with a tax professional.
The maximum limit for RRSP contributions in 2010 is 18 per cent of your income, to a maximum of $22,000, plus any previous contribution room. Check your 2009 Notice of Assessment from the Canada Revenue Agency for your 2010 RRSP limit.
Contributions up to $2,000 in excess of RRSP limits can be made without being subject to a penalty tax. However, you cannot claim a deduction for the excess amount. While RRSP withdrawals are taxed, the Home Buyers’ Plan and Lifelong Learning Plan allow you to withdraw money from your RRSP without penalty as long as they are paid back within certain time frames. If the money is not repaid, it will be considered income.
If you over-contribute by more than $2,000, you are subject to a 1-per-cent penalty tax for each month you are in excess of that. You have to complete a T1-OVP Individual Tax Return for RRSP Excess Contributions to calculate the amount of the over-contribution and penalty tax. This form must be filed, and the tax remitted, within 90 days from the end of the year. (That deadline is March 30, 2011, if there was any excess in the plan at the end of any month in 2010).
When you request a withdrawal from your RRSP, the financial institution is required to withhold a certain percentage of tax based on the amount of the withdrawal: 10 per cent on amounts up to and including $5,000; 20 per cent on amounts over $5,000 up to and including $15,000; and 30 per cent on amounts over $15,000. The amount withheld at source is not usually sufficient, so make sure you set enough money aside to cover your final tax liability.
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