Waivers of TFSA overcontribution tax | Tax Free Savings Accounts | Discussion forum

Norman1 said
CRA has the discretion to waive the TFSA overcontribution tax of 1% per month. This is from Spectrum Law: Gekas v. Canada…:

It is the CRA’s policy to send a warning letter to a first-time over-contributor. If the excess amount is not removed, the CRA will assess the tax. Repeat over-contributors will be assessed without warning.[2] The CRA is aggressive in imposing TFSA over-contribution taxes.

Very helpful advice. Anyone have any experience with the 'warning letter'?

I'd withdraw any excess contribution asap, then you're only subject to the monthly penalty for one month and if they actually go ahead and assess you for that penalty (whenever that happens, maybe in 2023) you can always either pay or appeal then.

The over-contribution has already been removed. Now, just waiting to remove the $2 interest it generated, at the end of the month.

Thanks for all the helpful advice.

From my experience with my mom's situation, any profit on the overcontribution is ignored and you are not responsible for it. It is part of the tax free account. The penalty is in the 1% only.

I did not appeal my mother's 1% fine.

By the time I knew about it, it was almost a year after the over-contribution had been made, which was when I received the notice that she owed this money. I don't know if she received notification of overcontribution; if so, she threw it out and probably didn't know what it said or understand it. The rep I spoke to at CRA at that time suggested I could probably succeed in asking CRA to waive the fine
even at that late date due to her age and likely infirmity, but I didn't pursue it as I already had enough hassles. I complained clearly but informally to RBC branch manager, but they couldn't care less. The CRA rep's attitude suggested she'd heard these kinds of complaints about banks many times before.

Maybe it shouldn't be that difficult, but for a lot of people it really is. Not everyone is endowed with the same degree of facility with numbers or reading instructions. There is no point in berating them for what they cannot do. Apparently many bank employees can't even figure it out.

The whole way it is structured is silly and counter-intuitive, with people being able to take money out on Dec 31 and redeposit it the next day, but not being able to take it out on Jan 3 and do likewise.
The very least the government and/or the FIs could do is provide some sort of chart which people could use to keep track, which would readily show the their contribution room at all times. I have never seen any FI offer this.

This is off-thread, I know, but I find it all very annoying even though I personally have the skills needed.

I agree, an FI does not know what you're up to elsewhere, nor can it be substitute for CRA relief route available to everybody. And I agree the TFSA rules are pretty simple, I've not heard among the people in my circle that they're having problems with them. Dec 31 2021 is a lot different than Jan 1 2022 for a myriad of reasons, financial and otherwise, certainly not just TFSAs, just something generally known.

Registered products are not designed to be used for short-term purposes, TFSAs are no exception. If you're doing frequent ins/outs maybe best do it outside of registered accounts, unless you're ready to be meticulous in your recordkeeping. I keep my own paper chart, pretty simple, each line shows year, that year's annual limit, contributions made, withdrawals (zero to date) - I can calculate everything from that.

My parents, when they got to the age they no longer wanted to, or could, proficiently navigate the world of finances, taxes, etc got me to do it for them (and I lived 3 hours away, it was no problem once we set things up), their same-age friends, etc did similar from what I could see. It's a good idea to prepare ahead of time for a time that almost certainly will come and it's certainly not CRA's or a financial institution's job if I fail to do so, in my opinion.

Not everybody has to file a tax return. Here's the CRA info re who has to file (note there's no connection between filing a tax return and TFSAs):
https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/you-have-file-a-return.html

Also thanks for your post. I’ve always felt guilty about not doing those tax returns.

I had to post this. Today i meant to make a contribution to my td direct investing rrsp account and i accidentally transferred the money to my tfsa. I don’t know what i was thinking. Luckily it was a relatively small amount, but still annoying. I didn’t know if there was a way if you made a mistake you could remove it. I decided i didn’t want to wait on hold and left it. I haven’t gone over my limit.

I think the problem was originally i was going to invest in my tfsa first this year and then i changed my mind. This is the first time i’ve ever done this and i will be more careful in the future.