Five years ago, when I retired, I put a chunk of money into a Retirement Savings Plan. The amount that I contributed was based on a number that I got from Revenue Canada itself. A few months later (tax time) the government informed me that the allowable contribution amount was somewhat less than what I had been led to believe. I ran to the bank to withdraw said overcontribution but the bank said it was too late: that I would have to fill out some government form instead.

That form looked overly complicated to me and my wishful-thinking self decided that there would be other manners in which I could deal with the error. Three years ago I realized that I was wrong. Barring re-employment, not only would I have to fill out that form but I'd be paying a 1%-per-month penalty on the overcontribution. Unable to fill in the form on my own and not having anybody to help me do it, I put the issue into deep denial until earlier this year, when a friend provided me with their accountant's email.

On June 2 of this year I met with that accountant. He filled out a form that was different from the one that the bank had led me to believe needed doing. By August 23 I had had no response and I resent the form, this time by registered mail. Yesterday I received my reply. Revenue Canada denied the form request, stating that I would have needed to submit it prior to 2008. Instead, I would have to fill out the form that I had all along been reluctant to fill out, applying the 1%-per-month penalty.

Revenue Canada did however state an amount that needed to be withdrawn from my RSP in order for that tax penalty to cease: $2348. So I went to the bank this morning to do just that. I need to withdraw $2348 from my RSP, I stated. (This should be simple, I thought.) The young man suggested that I get the money from my line-of-credit instead. I told him that I was doing this because the government asked me to do it. He filled out the necessary withdrawal form, asked for the amount a second time, left to check something-or-other, and finally returned. He told me that it had to be $2349 because of some "rounding" situation. Looking at the form, he had withdrawn $2610 from the RSP, so that I would be getting $2349 after the mandatory 10% tax withdrawal.

I didn't need the $2348, I explained. I needed to withdraw that amount from the RSP because of an overcontribution situation that forced me to pay a 1%-per-month tax penalty until such a time that I took it out. The man left to get some help. He brought back a woman and I had to explain it all again! I suppose I should be thankful that he didn't call for security. Arriving home I pondered the next step. Revenue Canada, thankfully, had enclosed some worksheets that showed exactly how the tax penalty was to be calculated. I should do this soon, I thought.

Addendum: For the record, the direct penalties came to $1017. Three-and-a-half months after I mailed CRA this amount, I received from them a notice of assessment informing me that I owed yet another $213 in late-filing penalties and arrears interest.