Citation: 2009 TCC 630
Date: 20100105
Docket: 2008-2699(IT)I
BETWEEN:
JOHN C. McNAMEE,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
For the Appellant: The Appellant himself
Counsel for the Respondent: Sara Chaudhary
____________________________________________________________________
AMENDED REASONS FOR JUDGMENT
(Delivered
orally from the bench
on September 24, 2009, in Kingston, Ontario.)
McArthur J.
[1]
The Appellant, John
McNamee, has been immersed in the complex RRSP legislation with formulas and
calculations under the Income Tax Act. The issue arose from an excess
contribution he made to his RRSP in 1997 after he was downsized from work with
the Town of Napanee. The issue in his appeal narrows down to
whether penalties and interest totalling $2,719 had been properly imposed by
the Minister of National Revenue. The comprehension of the computations that I
will refer to are not only out of reach for most Canadians but to many officers
of Canada Revenue Agency.
[2]
The facts are as
follows. For 1997, the Appellant made an RRSP contribution of $44,000, and
claimed an RRSP deduction of $18,200 and carried forward the excess
contribution of $25,800. He did this, I believe, in contemplation of finding
new employment which did not happen.
[3]
For the 1998 taxation
year, he claimed $2,881 of excess contribution as an RRSP deduction.
[4]
In February 2004, the
Appellant filed a T3012A, a deduction waiver on the refund of your undeducted
RRSP contributions. This application was rejected by the Minister in March of
2004. In June of 2007, some three years later, the Minister informed the
Appellant that the excess contributions would be subject to a 1% tax as they
were withdrawn late.
[5]
He was advised to file
a T1-OVP, Individual Income Tax Return for RRSP Excess Contributions for 2003
and 2004. He did this forthwith. For the 2004 taxation year he included as
income a $24,000 withdrawal from his RRSP and claimed $7,200 as a credit for
tax withheld at source for the said withdrawal.
[6]
In September 2007, he
was assessed the following; $2,510 in Part X.1 Tax as well as a late filing
penalty of $426.73 penalty for the T1-OVP, and applicable interest for the 2003
taxation year, and $209,18 in Part X.1 Tax as well as a $35.56 penalty for the
late filed T1-OVP and applicable interest for the 2004 taxation year.
[7]
The Appellant’s
position from his Notice of Appeal is that no penalties and interest should
apply and that only the $7,200 in withholding tax that has already been paid
should remain.
[8]
However, the Minister
was correct in denying the Appellant’s T3012A application to withdraw the over-contribution
tax free. For the Appellant to recover his over-contribution, paragraph 146(8.2)(c)
requires the amount to have been withdrawn in the year it was paid and the year
in which the Appellant was assessed or the following year. Since the over-contribution
was made in 1997, the latest possible time for filing the T3012A would have
been 1999, the year following in which the Appellant was assessed. The Appellant submits that he was only made aware of the deadlines
some three years later.
[9]
The statutory provision
which imposes a 1% tax on RRSP over contributions is subsection 204.1(2.1),
which states in part:
204.1(2.1) Where, at the end of any month an
individual has a cumulative excess amount in respect of Registered Retirement
Savings Plans, the individual shall pay a tax under this Part equal to 1% of
that cumulative excess amount.
The term “cumulative excess amount” in respect of RRSPs
is defined in subsection 204.2(1.1). For the purposes of this hearing, it is
the amount of undeducted RRSP premiums which exceeded the $2,000 allowable over-contribution
and a formula follows resulting in the amount of $20,919. I am satisfied that
the calculation was done correctly.
[10]
In addition in the Act,
an additional penalty for failing to file a T1-OVP on time was applied. The
provision imposes a 5% tax payable plus 1% per month to a maximum of 12 months.
That is contained in section 162(1), and the calculation by
the Minister is correct.
[11]
Again, the Appellant does
not contest the $7,200 in tax which he paid. I believe he has done all he could
to abide by the provisions of the Act. I found him a sincere and
reliable witness. He sought assistance from CRA, receiving little helpful
guidance. A letter from the CRA dated February 2004 provided incorrect
information.
[12]
Upon a further letter
of May 23, 2004, he met with Mrs. Guffy, who he praised as being most helpful,
and he acted immediately on her advice.
[13]
I highly recommend that
the Minister considers, if it has not been made, a decision to waive the
interest and penalties. I find Mr. McNamee to be a very deserving taxpayer. He
over-contributed in 1997, and was unaware of the consequences until he heard
from CRA in 2003. He innocently over-contributed and upon being advised, he
acted immediately. This very complex legislation should not be used to penalize
the innocent and the uninformed, which Mr. McNamee and 99% of taxpayers would
be.
[14]
I strongly recommend
that the Appellant apply under subsection 220(3.1) to the Minister of National
Revenue to waive the interest and penalty. He paid the $7,200 upon withdrawal
of the overpayment. If a taxpayer is unsuccessful before the Minister, a review
can be made to the Federal Court.
[15]
In accordance with the
legislation, I must dismiss the appeals.
Signed at Ottawa,
Canada, this 5th day of January 2010.
“C.H. McArthur”
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