One of the requirements for the waiver under s. 204.1(4) or 207.06(1) of the penalty tax for an excess contribution to an RRSP or TFSA, respectively, is that the Minister be satisfied that the excess “arose as a consequence of reasonable error.” When asked about its interpretation of “reasonable error,” CRA first stated that “[f]or the error to be reasonable, it must … be considered by an impartial person to be more likely to occur rather than less likely to occur based on the circumstances of the taxpayer.”
It then indicated that ignorance of the contribution requirements generally will not be the basis for a waiver, but that “CRA may consider it appropriate to waive tax arising from a third-party error, depending on the circumstances.”
CRA then gave the following examples of instances where CRA has accepted that there was reasonable error:
- The taxpayer's notice of (re)assessment) indicated an RRSP deduction limit of $0, where in fact the limit was a negative amount, so that the taxpayer may have mistakenly believed that the taxpayer was entitled to the $2,000 allowance …;
- The taxpayer, through no personal fault, had over-contributed due to inaccurate information provided on the RRSP deduction limit statement [or by] the CRA…;
- The taxpayer's RRSP deduction limit had been reduced retroactively, due to events such as the late submission of a pension adjustment or amended pension adjustment, or the late submission of an exempt past service pension adjustment or T215 slip … for exempt past service pension adjustments;
- The taxpayer, a TFSA holder, had made multiple contributions to and withdrawals from his TFSA with the objective of maintaining a TFSA account balance below the contribution limit.