Personal Finance

TFSA Over-Contribution Penalty – How To Fix It

I’ve been reading a couple of articles lately about TFSA over-contribution penalties which are being levied against some Canadians by the CRA.  These penalties have resulted from people over-contributing to their TFSA (Tax Free Savings Account).  It appears there are two main causes for these over-contributions, which will be discussed here.

[update June 17]

Rob Carrick wrote an article on the Globe with quotes from a CRA spokesperson who appears to be saying that the TFSA contributions will be forgiven, if the error is genuine

In practice, CRA is saying that relief may be available for people who mistakenly overcontributed to a TFSA.

“Because we are reviewing each and every [situation] on a case-by-case basis, it’s correct to say that relief may be provided,” CRA spokeswoman Caitlin Workman said Wednesday. “Each case will be looked at with the facts at hand, so I’m a little wary of issuing a blanket statement. If it was truly an error – that’s what we tend to look at.”

[end of update]

Here is a TFSA rules refresher which contains all the pertinent rules.

What is the rule for TFSA contribution limits?

  • Every Canadian who is 18 years of age or older, gets $5,000 of contribution room per year for the years 2009 to 2012 and $5,500 for year 2013 and beyond.
  • If you make a contribution, then the amount of available contribution room is reduced by the amount of the contribution.
  • If you make a withdrawal, then that withdrawal amount will be added to your available contribution room, starting January 1 of the following calendar year.

What is the TFSA over-contribution penalty?

The TFSA over-contribution penalty is 1% per month, levied on the amount of excess TFSA contributions.  If you have over-contributed to your TFSA by $1,000, then the penalty will be $10 per month until you have removed the excess amount,  or more contribution room becomes available.

TFSA over-contribution penalty because of lack of knowledge of TFSA rules

It appears, that some Canadians have inadvertently created an over-contribution to their TFSA, because they didn’t know that withdrawals from a TFSA account only get added to their available contribution room on January 1 of the next calendar year.  If you contributed $5,000 to your TFSA account in 2009, withdrew money in 2009, and then contributed more money to your TFSA in 2009, then you will be over the contribution limit.

If you are in this group, then I suggest you pay the penalty, remove the excess contribution if it still exists, and learn the rules better, so it doesn’t happen again.  The government was very clear about this withdrawal rule when the TFSA was introduced, and I think it is the responsibility of the individual investor to know the rules.  The TFSA is by far and away the simplest investing account available to Canadians, so getting tripped up by the one rule which is even remotely complicated, is not reason enough to expect relief from the government.

  • To pay the TFSA over-contribution penalty – Fill out CRA form RC 243 by June 30, 2010 (or the year after you are assessed the penalty).
  • To remove excess amounts from your TFSA account – Contact your financial institution and ask them to withdraw the amount of over-contribution.

If you wish to complain about this penalty, then write a letter to Jim Flaherty.

If you still want to try to get relief from this penalty, despite my stern lecture then I’ll suggest the following:

  • Appeal to the CRA – Plead ignorance, poverty, drunkenness – whatever it takes.  They might give you a break.
  • If you contributed more than $5,000 to any one financial institution in 2009, then send them the tax bill and demand they pay it.  Tell them that since it is their job to know the rules, they should have known that you were over-contributing for that year and should have warned you.
  • If you have a financial adviser and still got nailed with this penalty, then send the adviser the bill.  If they were in charge of all your TFSA transactions then they are definitely responsible.

TFSA over-contribution penalty because of incorrect reporting of institutional transfer to the CRA

Another situation, is someone who did a transfer of their TFSA from one financial institution to another, didn’t contribute more than $5,000 in 2009, and still received a notice of over-contribution from the CRA.  In this case, because you were transferring the TFSA money, there is no contribution or withdrawal.  The TFSA money should just move from one institution to another one, without any withdrawal or contribution taking place.  This move is allowed and is called a qualifying transfer.

If you withdrew the money, had the cash in your bank account and then “transferred” it to a new financial institution then you completed a withdrawal and contribution – not a transfer.

It is possible however, that one or both of the financial institutions you had the TFSA at, incorrectly reported the transfer as a contribution or a withdrawal.

For example if you transferred your RBC TFSA to an ING TFSA, then if there was an error made, RBC might have reported the transfer-out as a withdrawal, and ING might have reported the transfer-in as a contribution.

To fix this situation

  1. Contact the financial institutions involved with your TFSA transfer and ask if the transfer was incorrectly reported as a contribution or withdrawal.
  2. If the answer from #1 is yes – then ask the financial institution to fix the transaction so it is a transfer, and then ask them to file an amendment with the CRA.  Once this amendment is accepted by the CRA, then your over-contribution should disappear.
  3. If the answer is no – then call the CRA and try to clarify with them how they are determining you are over-contributed.

Over-contribution penalty is still being charged after withdrawal of excess amount

Michael James mentions yet another situation (see link at bottom of page where a person had over-contributed to their TFSA, fixed the problem by withdrawing the excess amount and yet was charged an over-contribution penalty for the remainder of the year.  In fact the penalty should have only been applied for the time period when they were over the contribution amount.

The CRA is in charge of adding up all your TFSA transactions in your various TFSA accounts and determining if you are staying within the rules.  The CRA relies on the reporting from the financial institutions to collect this data.

In this case, that person needs to contact their financial institution to verify that all their withdrawals were reported properly.  If for some reason, a person’s “removal of excess” withdrawal (which in fact, is just a regular withdrawal) was not reported to the CRA, then the CRA would think the person was continuing to be over-contributed.

To fix this situation

  1. Contact the financial institution(s) that hold your TFSA and verify all your transactions with them.  They need to be able to tell you if any transaction was reported as a withdrawal or a contribution.
  2. If you determine that the financial institution made an error, ask the financial institution to fix the transaction, and then ask them to file an amendment with the CRA.  Once this amendment is accepted by the CRA, then your over-contribution should disappear.
  3. If your financial institution appears to have reported your transactions correctly to the CRA, then call the CRA and try to clarify with them how they are determining you are over-contributed.

TFSA transfer to new financial institutions are expensive.  To avoid transfer fees, please read TFSA Institutional Transfer Strategies.

The cheapest TFSA is available at Questrade Discount Brokerage.  No annual accounts fee and $5 trades.

Other articles about TFSA over-contribution penalties

TFSA Over Contributions at the Canadian Tax Resource blog.

Taxpayers hit with penalties at the Toronto Star – written by Ellen Roseman.

TFSA Over-Contributions May Be Over-Penalized at Michael James on Money.

TFSA Excess Contribution Penalties Ensare Taxpayers at the Canadian Capitalist.

Qualifying Transfer definition at the CRA.  This explains that transfers of TFSA money between financial institutions will not affect your contribution or withdrawal amounts for the year.

41 replies on “TFSA Over-Contribution Penalty – How To Fix It”

That’s a good practical guide for dealing with the TFSA over-contribution problem. The possibility of a misreporting of a legitimate transfer is something I hadn’t considered.

That’s just another reason to like ING. I have my TFSA with them. I put in about $4,000 and then took out about 1500 a few months later. When I’d put in another $1000 and went to put in more, it would not let me, saying I’d maxed out my contribution. I couldn’t figure it out because the balance wasn’t $5000. So I called and they explained this to me. If the bank hadn’t stopped me from doing it, I’d be paying the penalty too.

What about the folks who (oy) withdrew and deposited multiple times, ending up with an overcontribution penalty based on $25,000 ? I would hope the CRA can waive that down and make sure it’s all cleared up.

@Michael – thanks.

@Nadine – that is something that all the financial companies should have done. However, if someone was making various contributions with different companies, then there would be no way for anyone to know – other than the contributor.

@Charles – Michael James has talked about the situation where people have done multiple withdrawals and contributions – never going over $5k in their TFSA but getting nailed big-time on over-contribution. They should have learned the rules better, but I wouldn’t be surprised if the gov’t offered some relief.

Nice Post:

Can you please explain what is Section 207.06 of the income tax act? and why did the CRA lady tell someone to quote it in her letter of appeal?

Looks messy 🙂

@Curious – thanks.

I’m not familiar with section 207.06 – according to
it says:

“Waiver of tax payable
Income Tax Act s. 207.06

The Minister of National Revenue may waive or cancel all or part of the tax payable regarding excess amounts or non-resident contributions if

the liability arose as a consequence of a reasonable error; and

the individual rectifies the situation without delay, by transferring out the excess amount or non-resident contribution.”

I guess the idea is that if you are trying to get the CRA to waive the fee, that section might help you, if you assume that ignorance of the rules is a reasonable defence.

I sincerely hope that you have to pay a $600 penalty some day for a little misunderstanding, then we will love to hear your lecturing.

Why do people not accept responsibility for their own actions? The government is to blame! The banks are to blame! My financial planner is to blame! Never it’s my fault. Every person that over contributed did not learn the facts about the programme as offered. If someone received an over contribution because a transfer was reported incorrectly, that can be corrected.

General Motors sold me my car. They didn’t tell me that I have to drive on the righthand side of the road. Even though their vechicles go faster than 100 km/h, they didn’t tell me that the speed limit on the 401 is that. By the logic put foward in some the commemts above, GM should pay for any ticket/fine I receive if they don’t explain the Highway Traffic Act to me OR if they allow any of their vechicles to exceed the maximum speed.

Learn the rules people, there’s no-one to blame but yourself.

I got one of those penalties to pay by June 30th! Mike, you are right, it’s 1% of the overall balance :0(. I left my excess in contribution not only for a month. My mistake was about the withdraw, the amount you withdraw can be reinvested yes, but only on the next year… I had account at 2 places for my TFSA, so no one is responsible for my mistake than myself and no one knew I was going a mistake… And this mistake is costing me 75$… Great thing I have a bit of money on the side! I learn my lesson, Withdraw = contribution for the year after ONLY!!! Can’t believe still this mistake iscosting me 75$. I just really hate myself for this mistake. Just when everything is going well, have money to invest…….. and there you go, something happen. You know, really sad. And should no one be too rude about saying stuff like no one to blame but yourself kind of thing to anyone. That kind of stuff really HURT!!!

@Sunny – You need to get a hold of yourself – it was an honest mistake and it’s only $75. Don’t beat yourself up over it.

“Officer, I had no idea I was not allowed to drive 60 km/h in the school zone”.

Sucks, but an assumption that the account was just a ‘regular savings account’ should not have been made. If I over contributed to my RRSP last year, should I get the same sympathy?

Yes you should Sampson. This is a new product and people are just learning how to use it. People don’t always read the fine print.

One day I may also have the problem of over contributing to my investments. That is a day I look forward to with great relish. 🙂

Rachelle, I’m not a completely cold-hearted jerk, however, my point is only that people SHOULD read all the fine print and be expected to do so.

I can understand if the financial institutions and ‘investment advisors’ at big banks have wrongly given advice regarding withdrawals leading to some people taking money out of one institution and putting it into another. I’d be mighty upset too. However, to suggest this is the government’s fault and that people deserve a free pass, that I don’t agree with. Also, this type of mistake is an issue with the financial institution, not the government.

I’ve read some comments where people feel duped by the government, or that the government made the rules obscure and opaque. Even if they are, the onus is in the hands of the individual.

Thanks for the mention Mike. While I have sympathy for taxpayers on hook for excess TFSA penalties, as I said in my post, I don’t think there should be a blanket waiver. It looks like many financial institutions failed to warn TFSA account holders that they may be over contributing. This is a matter between the client and her bank. I don’t see why the Government should waive everyone their penalties.

*Canadian Capitalist*

While I agree ignorance should not be an excuse, the penalties are excessive, and thus should be waived. If person X never actually had more than $5000 in the account, be withdrew and re-deposited numerous times therefore accruing a virtual over-contribution of say $25,000 (and a $250 penalty). Is this just? This is the same penalty for over contributing an RRSP; 1) without the $2000 grace amount AND 2) the fact that the RRSP funds are tax free. These TSFA’s were supposed to be a vessel for Canadians to save their money and not have to pay tax on the proceeds. If the proceeds never went above the $5000 threshold why should be expected to pay such a ludicrous penalty? It’s an unjust penalty for most people that genuinely didn’t realize that “hey, I don’t have more than $5000 in my account, I’ve stuck to the limit so I should be fine”. They should have called it a “one-time TAX FREE SAVINGS DEPOSIT”.

I just talked to a CRA employee by phone. My bank said I’m O.K. now for next year because I paid the 2009 fine for the “re-contribution ” fine BUT this girl from CRA said they misimformed me again and it is NOT O.K. NOW for 2010 I am going to get ANOTHER fine for the time from January till June (but they are “not aware of my situation yet until the bank notifies them at the end of the tax year that I have yet again an over contribution for 2010.I am in financial difficulty because my employer went to Mexico for a better bottom line and left a 39 year employee with nothing. I tried the TFSA to save up money for a new furnace.My bank did NOT supply a brochure.They weren’t available yet and they did not mention anything about penalties when I withdrew the money for the furnace OR when I “RE-contributed it. After talking to the bank again today, they still insist “It’s O.K.”I hope the minister responsible for this situation can rectify it soon. -Peter.

How to send the request for the waiver?
1. T400A with a cheque
2. T400A without a cheque
3. A letter with the cheque
4. A letter without a check

And who we should send the request to?

I sent a T400A to my CRA Tax Centre (Winnipeg for my area) without a cheque. I guess now I wait and see if I get another little envelope with a bill plus interest on top of my $300 penalty.

“The TFSA is by far and away the simplest investing account available to Canadians”

Is everyone ready for this ? This is what we SHOULD have done instead of this convoluted and dangerous account …

The first 500$ of interest earned is tax free, no special accounts, no special form, you simply have to declare interest earned above 500$. Each year, that can go up by a fixed rate tied closely to inflation. Voila, all problems solved, all problems avoided.

@Jay from Ottawa: I agree that something like some tax-free interest is much simpler. In fact, this used to exist in the tax system a long time ago. However, it’s too easy for another government to come in and eliminate this tax break. Introducing TFSAs is much harder for another government to take away. Another thing to consider is that over time some people will be able to save large amounts in TFSAs and will get much more than $500 interest tax free each year. We’ve had some teething problems with TFSAs, but they are likely to have more permanence than a simple tax break and have the potential to create much larger savings.

It should be understood that there are serious flaws in the TFSA government program, which do not really seem to be discussed by the various “financial gurus” – who just like the banks, are not typically in the business of helping people, but rather of helping themselves.

Fair enough.

The role of government however is to protect the population.

The unfortunate reality however is that governments and their individual actors appear to be blatantly in the business of helping themselves.

With the banks, financial gurus and governments in bed together, we end up with summits and impotent conclusions such as those reached at the G20 in Toronto.

“Cutting deficits will solve the impending collapse of the world monetary system”

“The TFSA is by far and away the simplest investing account available to Canadians”

Complete hogwosh.

Creating viable economies actually has very little to do with money and monetary policy.

Funny/sad how people are incapable of thinking.

Rather sad, how many are capable of thinking only in terms of hogwash and narrow self interest ..

ummm. I do not agree with this article at all. The banks and the government is responsible for introducing a fairly new savings account without clear cut rules for the bank to follow and banks for misinforming the public saying that it is like a normal savings account.

Hey everyone, and first of all when I received my mail I thought hey my HST rebate arrived. NOPE, JUST MORE TAXES. “YAY”. So I called CRA to find out more and argue my case. The CRA telephone operator could barely speak English and told me that I have to treat my TFSA account like income tax. But then I said then how come it is called a Tax-free “SAVINGS” account and you get it with a bank not the CRA. She had no comment and kept repeating the same BS saying that I over contributed. Funny that when I was transferred to a live operator, they even told me there was a Separate department that deals with this, which is outrageous. However, I do agree with the earlier posters stating that PC financial does a great job of advertising falsely. For everyone, who did not hear or find out about this new announcement; you have until August 3, 2010 now to file your letter/ form. here is the link

Also, if anyone starts a class action lawsuit against the banks and CRA. you can count me in.

@Phil: Based on your comments, it appears there are situations you are not aware of.

First off – excessive penalties.
While I can understand your angst – what about the other end of the spectrum? Some people contributed $200K to the TFSA to buy a mining stock, sold some of it what it had quadruped and have to pay a penalty of $8K to end up with over $600K tax-free. Is the $8K a just penalty?

Secondly – you state the penalty is the same as the RRSP without the grace $2K and the RRSP fund are tax free.

My guess is the government intented to make the penalty significant enought that people would have incentive to make sure their contributions across multiple account were correct. They probably figured that by making it the same as the RRSP – this would do the trick and be something people were used to. Sadly – most people either didn’t notice the penalty (and what would cause it) or figured out a way to make the penalty irrelevant.

Thirdly – you state “These TSFA’s were supposed to be a vessel for Canadians to save their money and not have to pay tax on the proceeds. If the proceeds never went above the $5000 threshold why should be expected to pay such a ludicrous penalty?”

Based on this statement, it appears you are unclear on the rules. For a TFSA, all that matters is the contribution room earned and withdrawals adding to *next* year’s contribution room earned. Proceeds are irrelevant. Even when an overcontribution is assesed, it is the over-contribution amount, not the account balance that is subject to the penalty.

Re: They should have called it a “one-time TAX FREE SAVINGS DEPOSIT”.

*shrug* – I made around twelve deposits to two TFSAs and two withdrawals last year so “one-time” would add to the confusion.

Though I’d prefer if it was “Tax Free Invesment Account” – then maybe people would see it’s real value. I’m quite happy with the 30% capital gain plus the 8% dividend my energy stock has appreciated in my TFSA.


@ Jay from Ottawa and Michael James:

I don’t mean to be rude but are you nuts?

There is no way that “your first $500 in bank interest is tax-free” suggestion is the same as the current TFSA. That is more like an grapes to apples comparison, where your suggestion is a single grape and the TFSA is an apple. *grin*

Your suggestion provides $500 interest writeoff – it is restricted to one type of gain (i.e. interest) and one amount (i.e. $500) that is tax free.

Compare this to the current situation under the existing TFSA rules. I have in a TFSA one energy stock that has a 30% capital gain and 8% dividends – all tax-free since 2009. The gains/dividends far exeeeds the $500 interest writeoff you are proposing.

Sure – the rules are simpler but it is also far less beneficial!

I’d rather there was an education campaign or whatever fixes the confusion compared to giving up a significant source of tax-free gains!


The government finally decided to re-imberse me. I had one letter that said it was being considered, followed the next day by a letter that said I would be getting my money returned to me. The following week I received a cheque from the government for the correct amount of money, ( which I re-invested back into the TFSA ). I am terrified of putting any more money in, or taking any more money out, or doing ANY other transactions with this account now, or in the future. I was unaware that the bank could give information about my accounts to the government WITHOUT TELLING ME ANYTHING ABOUT IT, and then waiting for 6 mths. until the government contacted me to pay the interest penalty on the now long over-due interest, before offering me their condolences. My finacial advisor at the bank said “lots of other people were in the same position “. She should know, she gave them the information about the” RE-CONTRIBUTION “that I had commited. I have no words… -Peter.


I’m glad to hear the penalty was waived but am puzzled by a few things.

First off – when you say that you “re-invested” the waived penalty, did you have enough TFSA contribution room for this contribution? It is not clear to me from the posts whether the over-contribution situation had been dealt with. If there is still an over-contribution, it is good that you are worried as then the over-contribution (and penalties) will be getting larger.

Secondly – assuming the over-contribution has been dealt with and you have some TFSA contribution room, I’m not sure why you are concerned about TFSA transactions.

Summarizing the key rules from CRA’s website that I found in Feb 2009:

Rule #1
20xx TFSA contributon room = 20xx $5K + unused room from previous years + last year withdrawals.

Rule #2
Withdrawals this year add to *next* year’s TFSA contribution room. They can’t be put back in the same year.

Rule #3
If you over-contribute, the penalty is 1% per month on the over-contribution until either the excess is removed or new contribution room takes care of the excess.

Rule #4
You can open as many TFSA accounts as you want so it is up to *you* to make sure you don’t over-contribute across all of your TFSAs.

Sample Situation:
So using someone has contributed the maximum to their 2009 and 2010 TFSAs, then withdrew $3K in Sept 2010, this would mean:
2011 TFSA contribution room = 2011 $5K + unused prvious years + last year withdrawals
= $5K + $0 + $3K
= $8K
So for 2011, the maximum they can put into *all* TFSAs is $8K. They can withdrawal whatever they want, whenever they want but the withdrawal amounts have to wait for 2012.

So in 2011, they contribute $7K in Feb and withdraw $5K in July, for the rest of 2011 they have 2011 TFSA room – 2011 contributions = $8K from above – $7K Feb contributions, leaving $1 for the remainder of the year. The withdrawal $5K is added to the 2012 TFSA contribution room, as per Rule #2.

I’m hoping this helps.

I noticed you are unhappy with your bank advisor – I’d consider switching advisor and/or banks. After reading the CRA rule in Feb 2009, I opened two TFSAs with two different financial institutions. Both correctly covered the rules for contributions and withdrawals. I know it is of little consolation when you experienced the opposite, but some were correctly explaining the rules.



*sigh* – I thought I’d found all the mistakes and fixed them before posting.

In the sample calcualtion of the August to Dec 2011 contribution room, $8K – $7K does not equal $1 but it does equal $1K.

I should also make clear in case you haven’t seen this short form before that $1K is a short for for $1,000.00 – which a lot of people use to shorten their text.


I opened a few tfsa in 2009 online through bank website. I was over contributed because lacks of rules. The bank was never talk to me about my tax free saving account, so I really didn’t know that I’m over-contribued. In 2010, I was received the letter from CRA declaired that my penality for over-contribution is almost $1600. So, I removed all of my tx free saving accounts. Then, I wrote a letter to CRA by described my situation and tried if my penality can be waived. However, I got a letter from CRA refused my request beacuse removal of excess tfsa contribution did not occur with a reasonable time frame. I don’t really know what should I do next? Should I try appeal again again or talk to my bank to see if there’s any solition for my case?

I had $10000 in my TFSA in Jan, 2010. I then withdrew that money to buy a car in Feb, 2010, and gradually re-contributed that money over the course of the year, not knowing the rule that I couldn’t recontribute that money until Jan of the following year. Recently I got a notice from CRA saying that the sum of my monthly over-contributions for 2010 is in excess of $70000, and that I’m to pay a 1% penalty ($700+).. Ouch!! My TFSA is just an ING High-Interest Savings, so it doesn’t give me a high return. If I pay this penalty, my TFSA will have netted me a loss of a few hundred dollars over this time. Disappointed that ING let me over-contribute (would think they would catch this), and also disappointed that I never heard of this rule until now. I was very careful in going by the TFSA Contribution Summary page in my ING online banking, which lists both the TFSA contributions for the year and withdraws for the year, to make sure the difference was no more than the $5000 I was allowed. I handle my finances very carefully, and it was an honest mistake not knowing this rule. Talking with friends who also have TFSA’s, none of them were aware of this rule either. Really hope the CRA will give me a break on this one, and it will be lesson learned. If not, I will have to deflect some anger towards ING, who I love. Hopefully more stories like this will help spread the word about this rule which few seem to know about.

I had transfer in/out many times in this accout in 2010, but the net balance wasn’t over $5000. Now I received CRA letter for charging me $1,230 over-contribution penalty. any advise. Thank you!!

This rule is ridiculous. I transferred 13000 from one TFSA to another using automatic bill payment option through my financial institution. I did not touch the money and it was transferred to the new account the next day. CRA just sent me a letter saying that I owe $800 in penalties because in their eyes I over contributed and the transfer was done improperly.

The hilarious part is, my investments the account have gone from 13000 to 1500. So not only have I lost 85% of the value of my investments, CRA wants to charge me another $800 in penalties. What a joke. I would much further ahead if I paid tax on all my investment income and never opened this account.

apparently i now owe 200$ in taxes for my tax free savings account.
and this ignorant article made me more pissed off..

it does happen to normal people..


I’ve recently over contributed into my TFSA by approx. $20,000.00 (my fault for not reading 20 pages of font 8 size lettering filled with a foreign legal language mumbo jumbo) – seriously though, it was my fault, I take full responsibility for the error.


So the 20k was invested into the TSX market where I have made profit. After researching the potential penalties on the “excess contribution amount” I’ve got more questions than I do answers (as i’m sure most people do)

I’m currently in a pickle. My stock investments are doing great, and I don’t want to remove the amount from the investment to pay some penalty of 1% per month of my excess contribution room. If I do, then I don’t cash in on the full potential of my stocks + I get hit with the transfer fee’s + 1% per month fee’s.

My Interest rate being accumulated has offset the penalties pending (or has it?)

My question is…

I’ve invested 20k into my TFSA, 5k is available for use, but 15k is over the limit.. does that 15k in the account being used to increase my gains get flagged with additional penalties? would this result in myself filing the difference of my “overdraft” on my tax return under Capital Gains? where they then would take 50% of my total profit and tax that an additional 13-23%?

After contacting the Canadian Government TFSA via phone, they had trouble answering my question and just referred me to a webpage where it gave me a lot of legal mumbo jumbo verbage that I don’t fully understand.

Is it possible for someone to help me figure out what the best case scenario is for my situation?


Is this how the government would calculate my tax rate?

Deposit: 20,000.00
Limit: 5,000.00
Over Contributions: 15,000.00

The following year I cash in my investment at 50,000.00 (reaching for the stars eh? lol)

Total profit Gains : x2.5
Total Profit Gains of the 5,000.00 invested: 12,500.00
Total Profit Gains of the 15,000.00 with Over Contribution: 37,500.00

Capital Gains Filed on Tax Return (50% of over Contribution): 18,750.00
Taxable fee(23%): $4,312.5

So out of the total Investment, I would be taxed 4,312.50 dollars? – correct?

I am in the same situation, facing high penalty charges for over contributing to the TFSA account.
I filled up the fillable online schedule A of form RC243 and I noticed that the total was different to what I had on paper.
I found the error in the math, over-contribution penalty was still being charged after I withdrew the excess amount.
Luckily I found how to fix this glitch!!!!!!!!!!!!!
On all months, you need to break the chronological sequence and first enter the withdrawals you made and then enter the contributions you made.

in January 2013 you contributed 5500, which used up the contribution room for 2013.
then you withdrew $35000, then you made a deposit of $5000

if you enter the numbers in this order :
contribution $5000
withdraw $35000
contribution $5000

you will see that the over contribution for Jan and all the subsequent months will be $5000.
even though you removed the excess by withdrawing the $35000 in that months, the form still applies the $5000 over contribution at the end of every month till the end of the year.

if you enter the data in this order:
contribution $5500
contribution $5500
withdrawal $35000

then the over contribution at the end of January will be $5000 as it should but the rest of the year it will be $0, as it should since you removed all the excess from the account.

Hope this helps.

in the explanation I gave, the order should be reversed,
…first enter the contributions you made and then enter the withdrawals you made…

Screw the banks. Screw savings accounts and screw the government cash grabs.

I’ve been burned on savings accounts and lost thousands on mutual funds when markets crashed.

Now my money goes in a fire-proof safe in my basement and when it gets to a certain amount goes into a safe deposit box in a bank. Screw the piddly interest I miss out on.

I have more money saved now than I ever have and I don’t care what the stock market does or how many recessions there are or what the real estate market does.

Also, when I die the executor knows where the money is and has power of attorney and it’s instant cash for the benefactors of my will with no
B.S. to wade through.

Facing a ~$2,500 penalty! RBC advised me I could make three contributions of $5,000 in 2011 when I set it up. The catch is I was non-resident prior to that and therefore not eligible for the first two. It was one of their financial advisers and they knew I was non-resident prior, so I will have a go at them to either pay or try to get CRA to waive it.

A few years ago I transferred my TFSA from Tangerine t CIBC
as a result I got fine a large penalty
I talked to Tangerine and they said it was not their mistake then I Talked to my Bank The CIBC and they said it was not their mistake
Then I talk to my accountant and he said I was not the only one it happened to a lots of his clients ,
I withdrew all the money out of that TFSA and paid the penalty wich was large enough that 10 years of interest would not have made up for it
So I will never put money in a TFSA again
I prefer paying income tax on what I make rather then getting shafed by the Government for some obscure rules

Hi, I accidentally put extra 400 dollars into my TFSA that is already limited, then I withdrew it 4 hours later, I was wondering do I still have to pay 1% tax for it?

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