My client put money in an RRSP they can't deduct. How do they get it back without tax being withheld, and do they still pay tax on it?
Form T3012A lets your client withdraw RRSP contributions they never deducted with no tax withheld, once the CRA approves it. The refund goes on line 12900 with an equal deduction on line 23200. It must arrive in the contribution year or the next, or the assessment year or the next. Without the form, the issuer withholds 10% to 30%.
Which route gets the money out: T3012A or a plain withdrawal?
Both routes end with the same deduction. Form T3012A is the CRA's tax deduction waiver: once the CRA signs it, the RRSP issuer can refund your client's unused contributions without withholding tax canada.ca. Without it, the issuer must withhold, and your client claims the deduction afterward on Form T746
canada.ca.
| With an approved T3012A | Plain withdrawal, then T746 | |
|---|---|---|
| Tax withheld by the issuer | None | 10%, 20% or 30% (5%, 10% or 15% federal in Quebec) |
| Slip | T4RSP box 20 | T4RSP box 22 |
| Income line on the T1 | 12900 | 12900 |
| Deduction line | 23200 | 23200, worked out on T746 |
| Withholding recovered | Nothing to recover | Credited on line 43700 |
| Wait before the money moves | Until the CRA returns the signed copies | None |
| Works if the money already came out | No | Yes |
The withholding rates are the CRA lump sum rates as of October 2026: 10% up to $5,000, 20% over $5,000 up to $15,000 and 30% above that, with Quebec funds also subject to provincial tax canada.ca. The banding detail is on lump sum withholding rates. Withholding is a prepayment, not a cost: it comes back on the return. The real cost of the T3012A route is time, because the 1% monthly tax on an overcontribution keeps accruing until the money leaves the plan.
Who can use the T3012A, and by when must the refund arrive?
The T3012A instructions list four conditions your client must meet canada.ca. The contributions went to their own RRSP, PRPP or SPP, or to a spouse's or common law partner's RRSP or SPP, and were never deducted or designated as an HBP or LLP repayment. The refund isn't designated as a qualifying withdrawal for a past service pension adjustment. No part of it comes from an RPP, PRPP, SPP or DPSP lump sum transferred directly to the plan. And the refund is received in a qualifying year.
| Refund received in | Qualifies? |
|---|---|
| The year the contributions were made | Yes |
| The following year | Yes |
| The year the CRA sent the notice of assessment or reassessment for the contribution year | Yes |
| The year after that notice | Yes |
| Any later year | No |
The timing and the deduction come from ITA 146(8.2), and 146(8.21) then treats the refunded premiums as never paid, so they can't be deducted again later laws-lois.justice.gc.ca. The CRA must also find it reasonable that your client either expected to fully deduct the contributions for that year or the year before, or didn't contribute intending to withdraw and deduct
canada.ca. A contribution made with no room and the plan to pull it out with a deduction fails that test.
Worked example: Part 1 for a $10,000 contribution with $4,000 of room
Your client's notice of assessment shows a 2026 RRSP deduction limit of $4,000. On March 20, 2026, misreading an older notice, they contribute $10,000, with no other undeducted contributions. They can hold $6,000 ($4,000 plus the $2,000 cushion) without tax, so $4,000 is excess and costs 1% a month, $40, for each month it stays in canada.ca.
Part 1 of the T3012A works out how much the issuer may refund without withholding canada.ca. March 20 falls after the first 60 days of 2026, so nothing goes on lines 2 and 3.
| T3012A line | What it asks | Amount |
|---|---|---|
| 1 | Total contributions made in 2026 | $10,000 |
| 2 | Part of line 1 made in the first 60 days of 2026 | $0 |
| 3 | Part of line 2 deducted for 2025 | $0 |
| 4 | Part of line 1 deducted or to be deducted for 2026 | $4,000 |
| 5 | Part of line 1 deducted or to be deducted for a later year (2027) | $2,000 |
| 6 | Amounts on earlier approved T3012A forms or T746 line 13 for 2026 | $0 |
| 7 | Lines 3 to 6 added | $6,000 |
| 8 | Line 1 minus line 7: refundable without withholding | $4,000 |
In Part 2 your client designates the $4,000. That removes the excess and leaves $2,000 in the plan, inside the cushion, to deduct in 2027 (the line 5 amount). Had they planned to withdraw all $6,000 instead, line 5 would be $0 and line 8 $6,000. On the 2026 return: $4,000 of income on line 12900 from T4RSP box 20, $4,000 deducted on line 23200, and $4,000 deducted on line 20800 for the room they had.
Now compare the timing. Say the signed copies come back and the issuer pays in August. The excess sat in the plan at the end of March, April, May, June and July: 5 months × $40 = $200 of tax. A plain withdrawal of $4,000 in April instead would have cost one month, $40, with $400 withheld (10%) and credited back on line 43700 of the 2026 return. Either way, the T1-OVP for 2026 is due 90 days after year end, March 31, 2027.
How the form moves between your client, the CRA and the issuer
Your client fills in Parts 1 and 2 and mails four copies to the tax centre shown on their notice of assessment, one form per plan, never with the T1, with proof of the contributions attached canada.ca. The form lists the Pension Workflow Team at the Jonquière, Sudbury and Winnipeg tax centres.
| Part | Who fills it in | What happens next |
|---|---|---|
| 1 and 2 | Your client (the contributor) | Four copies to the tax centre |
| 3 | The CRA | Three signed copies back to your client |
| 4 | Your client, plus the annuitant if it is a spousal plan | All three copies to the issuer |
| 5 | The RRSP issuer | Two copies back to your client, T4RSP or T4A issued |
A receipt photocopy only counts if the issuer certifies it as a true copy, and contributions made in the 89 days before an HBP or LLP withdrawal stay off line 1 because they may never be deductible canada.ca. See the Home Buyers' Plan rules if a withdrawal is coming. The CRA's page for the form doesn't publish a processing time
canada.ca, so don't promise one.
When the T3012A route is closed, what does your client do instead?
If the money already came out, use Form T746: Part 4 of the T3012A only covers amounts not yet withdrawn canada.ca. The T746 deduction on line 13 is the lesser of the unused contributions for the year (line 4) and the amounts withdrawn and included in income (line 12)
canada.ca.
The form also sends three cases elsewhere canada.ca. Unused contributions received as a commutation payment from a matured RRSP, or in a RRIF payment above the minimum after a transfer to the RRIF, go on T746. An RPP excess amount transferred to the plan uses Form T1043 instead. If the client already moved the RRSP into a RRIF (see converting an RRSP to a RRIF), the issuer must withhold on those withdrawals
canada.ca.
If the CRA refuses the T3012A because the expectation and intent test fails, T746 won't help, because it tests the same two conditions canada.ca. Your client can still withdraw to stop the 1% tax, but the withdrawal is then income with no offsetting deduction. Leaving the money in is also allowed; the excess just keeps attracting 1% a month until new room absorbs it
canada.ca. The penalty mechanics are on Form T1-OVP.
Sources
Does a client need an overcontribution to use the T3012A?
No. The form covers any contributions your client didn't deduct for any year, including amounts inside the $2,000 cushion canada.ca. The same timing and intent conditions still apply.
Does the T3012A cancel the 1% tax for months already passed?
No. The tax applies to the excess at the end of each month it sat in the plan. To have it cancelled, ask in writing on Form RC2503, showing the excess came from a reasonable error and that your client is taking reasonable steps to remove it, with documents showing the exact months of contributions and withdrawals canada.ca.
What happens to Schedule 7 after a T746 deduction?
The refunded contributions stop being RRSP contributions. If your client listed them on Schedule 7 in an earlier year, ask the CRA to adjust that return to reduce the unused contributions carried forward, and don't enter the amount on Schedule 7 again canada.ca.
Who gets the T4RSP for a spousal RRSP refund?
The issuer names the recipient in Part 5: either the contributor or the annuitant canada.ca. For who reports a spousal plan withdrawal in other cases, see spousal RRSP attribution.
General information for the tax year shown, not advice for a specific client. Confirm the facts before you file or remit.