tfsa problem

[kris10]

i am racking my brain here trying to figure out what all of this stuff means. ok so last year i put 5000$ into my tax free savings account. I am sure at some point i withdrew the money and put it into my regular savings account and then put it back into my tax free savings account.

At no point did i ever have over 10,00 in any accounts and it is saying my total contributions were 14,081 so they are charging me 1% which adds up to like $140.81 i owe them??

Can they do this? i thought if you withdrew the money that you still have the 5000 contribution room to add back in but they are adding every transaction all togethor. Am I crazy or should i dispute this?

At the very end of the year (around dec 29th) i did add like 4000 (totalling around 9000) or whatever it was because i knew i wouldnt be able to get to the bank for a bit and figured the 1% they would charge wouldn't be too much for like 2-3 days in there.Other then that the only "over the limit" stuff was the interest i received on it and almost every month i transfered it to my chequing or savings account.

[Grey]

Yes, they can charge you 1%.

From the CRA website:

Withdrawals, excluding qualifying transfers, made from your TFSA in the year will be added back to your TFSA contribution room at the beginning of the following year.

You cannot contribute more than your TFSA contribution room in a given year, even if you make withdrawals from the account during the year. If you do so, you will be subject to a tax of 1% of the highest excess TFSA amount in the month, for each month you are in an excess contribution position.

[kris10]

agh,thank you . guess they had to make money somehow. i assume it will be the same next year then cuz i moved my tfsa to another bank.

[ashedfc]

agh,thank you . guess they had to make money somehow. i assume it will be the same next year then cuz i moved my tfsa to another bank.

Its not about making money for CRA. They have all the money they need (& they don't have to tax for saving). Its actually to prevent misuse:
For example: There was a case, where, the person deposited $100000 into a TFSA account, then withdraw $95000, (so, $95k becomes new contribution room), then, he deposited the $95k back into the same account. And CRA could do nothing because his new contribution room just increase by the amount of withdrawal.

So, 1% per month is a deterance for misuse, (& there is no excemption ike RRSP has a $2000 over-limit contribution allowed).

Follow the guidelines: - I feel you should change your banker - he was dumb enough to explain you alternatives.
Talk to a financial advisor (or take multiple opinions).

[Grey]

Canadians not subject to penalties for confusion over tax free accounts

Fri Jun 25, 5:09 PM
By The Canadian Press

OTTAWA - Canadians who mistakenly put too much into their new tax free savings accounts are being given a break — no penalties.

The federal government said it won't penalize individuals inadvertently contributed more than the $5,000 annual limit in 2009, the first year of the program.

"Our government recognizes that there was some genuine confusion about the rules for the TFSA in the first year," said a statement released by the finance and revenue ministers.

"The first year of the program, we have taken the decision to be as flexible as possible in cases where a genuine misunderstanding of the TFSA contribution rules occurred."

Apparently many Canadians treated the program like an ordinary bank account, taking money out and putting it back in, thinking that as long as the account did not exceed $5,000 for the year, they were within the rules.

They were mistaken. While account holders can withdraw funds as they wish, they can not re-invest what they take out until the following year if that pushes total annual contributions above $5,000 in any single year.

An official with Revenue Canada said about 70,000 Canadians were notified in June that their total contributions exceeded the limit, and that they would be assessed a one per cent penalty on over-contributions each month.

Those issued letters represent only about two per cent of the about 4.7 million Canadians who have opened a tax free savings account since the program started in 2009.

The popular program allows individuals to invest a maximum of $5,000 a year into a special account, with future profits free of taxation.

Revenue Canada said Canadians who have received a letter about their over-investment should respond with an explanation.

The agency said if it receives no response, a notice of assessment will be issued, at which point account holders should file a request for relief or a formal notice of objection.

link
http://ca.news.finance.yahoo.com/s/2...-accounts.html

[Grey]

http://www.cra-arc.gc.ca/tx/ndvdls/t...n/rpt-eng.html

[richelleM]

i totally agree with $$$wise...they have to charge their customers with 1% to prevent misuse of their offers. btw, did you know about the best low interest credit card in Canada?

[ashedfc]

i totally agree with $$$wise...they have to charge their customers with 1% to prevent misuse of their offers.

CRA has waived the 1% penalty rule for 2009, as there were lot of confusion, & CRA made changes in mid 2009, creating even more confusion. Most of the confusion happened when TFSA account holders withdrew money & deposited into another TFSA account.
All those who transferred from one TFSA to another TFSA are fine.
But for 2010 onwards, CRA has issued strict guidelines, 1% over-contribution penalty stays.

[kris10]

Yeah i get that.
and omg, so my friend whos an accountant said they don't think i will get any break on it so i did not bother sending it in even though i finished it and printed it out and all. Will they still give a little break if i don't send in the dispute forms?

[omegacanuck]

I would highly doubt they will remove a penalty if you don't ask them to.

[mulock]

People should be speaking to a financial adviser when opening a TFSA to make sure they understand how the account works. If used properly, you can make A LOT of tax free money. TIP: when the recession does it's double dip (we're beginning to see the start of it now), buy up all the bank stock you can for $5000. Everything purchased within the TFIA (tax free investment account) will be profit and tax free Just look at BMO for instance....went from a low of ~$25/share during the peak of the recession to a high of $65/share in the last few months.

[ashedfc]

In a double dip recession, BMO will go back to $25 again. What has worked this time, might not work next time. Your example of BMO is good, but are lot better examples, Like, TCK, SMF, RBI, OSK, ELD. As far as banking goes, look at BAC (from $2 to $15). Pick your spot, make your gains & get-out before its too late, or else, the gains will be wiped out.
Banks are the real problem, they are not the solution, so, we will continue to see banking crisis in the near future. CDS, market is the most opaque market with a size of 615 trillion dollars. Just imagine a 0.5% loss (only half percent) equals over 3 trillion (its enough to wipe out several banks). Be extremely careful in stock picking.

Follow the link to see the magnitude of US debt- http://www.usdebtclock.org/

1st Video of 3rd July- http://www.marketoracle.co.uk/financ...s_videos_8.htm

If you have time visit other video's of the above link.

[luxor69]