Personal Finance

My TFSA balance is $200, and the CRA wants me to pay interest on $5700... wtf

  • Last Updated:
  • Jun 11th, 2012 4:21 pm
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Sr. Member
Apr 23, 2009
901 posts
87 upvotes
Jim1980 wrote: NEWS RELEASE BACK IN 2009 by CRA:

http://www.cra-arc.gc.ca/nwsrm/rlss/200 ... 2-eng.html



Bring this news printout from CRA's website to court with your because you were a little mislead and it caused you to make an honest mistake.

I even see a mention that the were going to work with the bank so that things would go "seamlessly"

James
Taken straight from the article:
...Effective January 1, Canadians 18 years of age and older can set aside up to $5000 every year in a variety of savings options and never pay tax on the income earned or on withdrawals."

That must mean I can deposit and withdraw as much as I like, as long as the balance doesn't exceed $5k, right? /sarcasm.

End of thread.
Newbie
Jun 8, 2010
35 posts
Gatineau
Adams06 wrote: Taken straight from the article:
...Effective January 1, Canadians 18 years of age and older can set aside up to $5000 every year in a variety of savings options and never pay tax on the income earned or on withdrawals."

That must mean I can deposit and withdraw as much as I like, as long as the balance doesn't exceed $5k, right? /sarcasm.

End of thread.
A thread should never be ended on sarcasm.

That link was a news release from CRA and may not be that important, however the globe and mail link and CTV links that have explanations on how you may get a waiver under certain circumstances are!

And really this is the information people are looking for and the reason someone started this thread in the first place.

Below the expert in tax gives her opinion and advice, and IMHO thats a cool way to end the thread.

http://v1.theglobeandmail.com/servlet/s ... PBusiness/

http://www.ctv.ca/generic/generated/sta ... 04046.html

************
End of thread.
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Sep 3, 2006
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I hope they don't give waivers for people who were too lazy to read all the documentation.
This isn't a blog.
Deal Addict
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Dec 9, 2007
1936 posts
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Toronto
When I first heard about this over-contribution issue, I have to admit, I laughed, but reading this thread and learning how hard some people have been hit by this, I have to say I have some sympathy for those getting whammied.

Sure, stupidity has it's price, but I think this year there should be some leniency and I hope the CRA exercises some forgiveness. Good luck to those of you who got sucker punched with this. Next year, I'll just laugh.
Newbie
Jun 15, 2010
16 posts
Ontario, Canada
I wonder if there is any math/accounting whiz kid who can calculate what’s the total amount I should pay 1% penalty on for 2009?
Jan. 5: Deposit to PC account, $1000.21 and $3900.
Jan. 14: Withdraw $1201 (PC) and Deposit (to ING) $1300
Feb. 23: Withdraw $1005 (PC).
Feb. 25: Deposit $1000 (to Dynamic Fund).
Then, for the rest of the year only withdrawals were made:
May 28: $2717.24 (PC).
May 29: $1308.44 (ING).
June 2: $1.46 (Closing ING account).
June 6: $2.18 (Closing PC account).
As you can see, at no time there was over $5000 (total) on my account(s).I called a tax office on June 8 and asked if somebody could explain the charges and help me fill in the RC264-CSH-A form. In short after about 45min and speaking to 2 different TFSA officers, they were unable to help me, actually did not seem to have a clue.
Also, I wonder why they don’t send the RC264-CSH-A (or on-line accessible or available upon the phone request). Instead, they only send RC263-P-E with the total amount filled in the line 1 of Part A, that is supposed to come from RC264-CSH-A.
Cheers
Deal Addict
Aug 1, 2008
1554 posts
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Ottawa
Michael 07 wrote: I wonder if there is any math/accounting whiz kid who can calculate what’s the total amount I should pay 1% penalty on for 2009?
Jan. 5: Deposit to PC account, $1000.21 and $3900.
Jan. 14: Withdraw $1201 (PC) and Deposit (to ING) $1300
Feb. 23: Withdraw $1005 (PC).
Feb. 25: Deposit $1000 (to Dynamic Fund).
Then, for the rest of the year only withdrawals were made:
May 28: $2717.24 (PC).
May 29: $1308.44 (ING).
June 2: $1.46 (Closing ING account).
June 6: $2.18 (Closing PC account).
As you can see, at no time there was over $5000 (total) on my account(s).
There's your problem...you're confusing balance with contribution. Your
_contributions_ in the first year cannot exceed $5000 but you've
contributed $7200 as far as I can see

$1000
$3900
$1300
$1000
=====
$7200
Deal Fanatic
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May 11, 2008
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Michael 07 wrote: I wonder if there is any math/accounting whiz kid who can calculate what’s the total amount I should pay 1% penalty on for 2009?
Jan. 5: Deposit to PC account, $1000.21 and $3900.
Jan. 14: Withdraw $1201 (PC) and Deposit (to ING) $1300
Feb. 23: Withdraw $1005 (PC).
Feb. 25: Deposit $1000 (to Dynamic Fund).
Then, for the rest of the year only withdrawals were made:
May 28: $2717.24 (PC).
May 29: $1308.44 (ING).
June 2: $1.46 (Closing ING account).
June 6: $2.18 (Closing PC account).
As you can see, at no time there was over $5000 (total) on my account(s).I called a tax office on June 8 and asked if somebody could explain the charges and help me fill in the RC264-CSH-A form. In short after about 45min and speaking to 2 different TFSA officers, they were unable to help me, actually did not seem to have a clue.
Also, I wonder why they don’t send the RC264-CSH-A (or on-line accessible or available upon the phone request). Instead, they only send RC263-P-E with the total amount filled in the line 1 of Part A, that is supposed to come from RC264-CSH-A.
Cheers
http://www.cra-arc.gc.ca/tx/ndvdls/tpcs ... n-eng.html
See the Example 2
Sr. Member
Jul 29, 2009
895 posts
14 upvotes
Michael 07 wrote: I wonder if there is any math/accounting whiz kid who can calculate what’s the total amount I should pay 1% penalty on for 2009?
Jan. 5: Deposit to PC account, $1000.21 and $3900.
Jan. 14: Withdraw $1201 (PC) and Deposit (to ING) $1300
Feb. 23: Withdraw $1005 (PC).
Feb. 25: Deposit $1000 (to Dynamic Fund).
Then, for the rest of the year only withdrawals were made:
May 28: $2717.24 (PC).
May 29: $1308.44 (ING).
June 2: $1.46 (Closing ING account).
June 6: $2.18 (Closing PC account).
I get a total penalty of $52.00. You were briefly over-contributed by $1,200 in January, and $1,000 over contributed from the end of Feb to the end of May (four months, since they base the penalty on the highest amount at any point in a month). $1,200 + ($1,000 x 4) = $5,200 .. multiply that by 1%, you get $52.

There were also a little over $4,000 in withdrawals that weren't used to reduce over-contributions that will be added back as contribution room in the new year.

That's what I get, anyway. It was a bit of a quick-and-dirty calculation.
Newbie
Jun 15, 2010
1 posts
Canada
PC Financial also got me in trouble with the CRA. I will owe $280 this year and $400 for next. Here is my story.
I log onto PC Financial website. An advertisement comes flashing at me. I click on it to open my Tax-Free Interest Plus Savings Account. I squinted to see the fine print and all it mentioned was a balance limit of $5000. It was unclear to what this account was because they did not even call it a TFSA. I thought sure I'll use it like my other savings account I was using with them, the Interest Plus Savings Account. I can easily see why so many of PC's customers fell into the same trap.
I never received any warnings for over-contributions like some other banks were giving.
Newbie
User avatar
Jun 4, 2007
35 posts
I normally would say you guys needs to ask more questions at the bank before opening the account but when my mom open her tfsa at bank of Montreal, there was some questions about her paper work. As her English is not great, I went with her to talk to them 2 day after it was opened. The girl couldn't give me an answer so I got upset and asked them what is the charge for transfer the account to somewhere else. She told me it depends. I asked what does it depend on, she couldn't answer me. At this point I was pretty skeptical about her knowledge so I ask her if she can let me speak to someone who knows more. She brought in someone else who is the TFSA expert at the branch who told me why transfer TFSA, withdraw the full $5000 and open a new account and put it in. I was told her she shouldn't be giving financial advice if she doesn't know what she's talking about and high tail out of there and told my mom to transfer asap even if there is a penalty. So I got to say ... sometimes even the bank don't know what they are talking about
Deal Guru
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Dec 30, 2004
13095 posts
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Toronto
Jason212 wrote: PC Financial also got me in trouble with the CRA. I will owe $280 this year and $400 for next. Here is my story.
I log onto PC Financial website. An advertisement comes flashing at me. I click on it to open my Tax-Free Interest Plus Savings Account. I squinted to see the fine print and all it mentioned was a balance limit of $5000. It was unclear to what this account was because they did not even call it a TFSA. I thought sure I'll use it like my other savings account I was using with them, the Interest Plus Savings Account. I can easily see why so many of PC's customers fell into the same trap.
I never received any warnings for over-contributions like some other banks were giving.
:cry:
Deal Addict
Nov 30, 2002
1606 posts
1 upvote
Edmonton. Äl-Berta
lol I got owned with 369.14$ bill from CRA today, do I win the $$$ race yet ? don't know wether should I laugh or smile, sheesh.

I feel so dumb now. another lesson that has to be learnt the hard way (I am from Vietnam and the first one was "no public drinking")
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Newbie
Jun 15, 2010
16 posts
Ontario, Canada
SpillOnAisle9 wrote: There's your problem...you're confusing balance with contribution. Your
_contributions_ in the first year cannot exceed $5000 but you've
contributed $7200 as far as I can see

$1000
$3900
$1300
$1000
=====
$7200
I can see that too, I am not talking about the limit calculation, but tring to figure out, how is the penalty calculated, since the amount the Over contribution is being charged on is lowered by withdraw being made AFTER the initial over contribution, for the FOLLOWING month(s) only.
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Mar 23, 2004
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Markham
Mgz wrote: lol I got owned with 369.14$ bill from CRA today, do I win the $$$ race yet ? don't know wether should I laugh or smile, sheesh.
we should have a poll :twisted: :lol: well at least u learned your less i guess? :)
Deal Expert
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Jan 27, 2004
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i'm the similar situation:
- open and contribute 5000 to tfsa on january 2009 at hsbc
- march 2009, transfer the 5000 from the previous tfsa acc to tfs investment and then cancel the previous tfsa acc

now i am getting a letter about invest 10k on tfsa? wtf? hell not i am going to pay for the stupid interest. i make $0 money on that and it's TRANSFER and the previous acc cancel and no re-contribute

i signed the letter that i do not agree and mail back. spoke to hsbc and they will deal with CRA.
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Newbie
Jun 8, 2010
35 posts
Gatineau
aplin wrote: I normally would say you guys needs to ask more questions at the bank before opening the account but when my mom open her tfsa at bank of Montreal, there was some questions about her paper work. As her English is not great, I went with her to talk to them 2 day after it was opened. The girl couldn't give me an answer so I got upset and asked them what is the charge for transfer the account to somewhere else. She told me it depends. I asked what does it depend on, she couldn't answer me. At this point I was pretty skeptical about her knowledge so I ask her if she can let me speak to someone who knows more. She brought in someone else who is the TFSA expert at the branch who told me why transfer TFSA, withdraw the full $5000 and open a new account and put it in. I was told her she shouldn't be giving financial advice if she doesn't know what she's talking about and high tail out of there and told my mom to transfer asap even if there is a penalty. So I got to say ... sometimes even the bank don't know what they are talking about
Good Story.

So imagine next you deal with a virtual bank, the boy on the other end sounds like he knows what he's talking about and maybe has a good selling background; however knows nothing about TFSA.

and even better yet, you timeshift back 1.5 years and my virtual bank mentions theres this new product coming out soon but I cant use it for 2 more months...explains all the benifits, no warnings. "treat it as you would a normal saving account. (ok I already have a "Interest Plus Savings Account", "Interest First Savings account" and a "savings account". but this new one will give you 3.x pecent! ) so why not. Ill mail you the paperwork and you sign nothing.

I didnt read the 5 page pamphlet 2 weeks later. My bad - Pay up.

Our fault Yes, but let me revise my conservative vote at next election! maybe revise my banking institution as well, but who's to guarantee the story from aplin wont happen there too.
Sr. Member
Apr 23, 2009
901 posts
87 upvotes
Jason212 wrote: PC Financial also got me in trouble with the CRA. I will owe $280 this year and $400 for next. Here is my story.
I log onto PC Financial website. An advertisement comes flashing at me. I click on it to open my Tax-Free Interest Plus Savings Account. I squinted to see the fine print and all it mentioned was a balance limit of $5000. It was unclear to what this account was because they did not even call it a TFSA. I thought sure I'll use it like my other savings account I was using with them, the Interest Plus Savings Account. I can easily see why so many of PC's customers fell into the same trap.
I never received any warnings for over-contributions like some other banks were giving.
Their Interest Plus Accounts are to give a slightly higher interest rate as long as you have at least $1k in the account (although it's the same rate regardless of balance in a TFSA there) and it is also to represent that the account gets an anniversary bonus.

Alot of people are saying that because it was advertised as a savings account, they were using it as a savings account. What people don't realize is that they are using it more like a checking account, moving money in and out frequently. It was not advertised as a "move your money around freely" account, the point of this account was to drop $5k in on Jan 1 every year and don't put anymore into it. Sure you can take money out without any charges, but you can't put that money back in until next year.

It's nice to see also that some people are taking responsibility for the issue.
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Feb 19, 2010
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qsub wrote: Hey guys,

there's still hope.

http://www.timescolonist.com/business/f ... story.html


Does anyone have the return address for the CRA? I paid the fine already but I'll followup with a letter in regards to the mistake and hopefully get my 100 bucks back.
It would be interesting to know how many of these 1.5% of people have legitimate issues with their financial institutions for incorrectly reflecting transfers as "contributions" and then what the real number is for the dumb asses that skate through life looking for somebody else to take care of them.

It's easy to have some sympathy for the former group and impossible to have any for the latter.
Sr. Member
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Oct 15, 2001
945 posts
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Toronto Star Article

Don’t panic! Appeal penalty tax on tax-free savings

http://www.thestar.com/business/persona ... ee-savings
Don’t panic! Appeal penalty tax on tax-free savings

By James Daw

Ignorance is no excuse for most laws, but tax-free savings account rules may be one exception.

So don’t panic, at least not this year.

If you are like most of the 70,000 taxpayers facing 1 per cent monthly tax on excess TFSA contributions in 2009, you do have an opportunity to appeal before June 30.

We’re going to offer tips on what to say in a few words, to save CRA staff time and effort, and to win your appeal.

It’s too bad the CRA letters to taxpayers were not more helpful. But CRA spokeswoman Caitlin Workman has offered helpful advice.

The last thing Finance Minister Jim Flaherty wanted to do was collect tax from the 4.6 million holders of these new accounts. His goal was to encourage more savings, not to penalize innocent errors.

Flaherty’s amendment to the Income Tax Act states specifically: “The Minister (of National Revenue) may waive or cancel all or part of the liability (for tax on excess TFSA contributions) where the Minister considers it just and equitable to do so having regard to all the circumstances, including whether the tax arose as a consequence of reasonable error.”

The CRA did have a duty to pursue taxpayers suspected of abusing the TFSA opportunity, and check for potential errors.

Unfortunately, its letters left the impression taxpayers could only appeal a tax on excess contributions if CRA’s calculations were in error. It did not say to go to your financial institutions if it made errors. Institutions were still waiting for instructions Friday on how to make those corrections.

But taxpayers who did not know, or were not told, all of the rules should tell CRA.

Many did not realize you cannot withdraw your savings and tax-free investment returns, then turnaround and put the same amount of money back into the account, or to another account, during the same calendar year. You must apply for a transfer, or wait until the new year, or later. You have to be a resident of Canada while contributing. Unless you are the spouse, you must have your own TFSA contribution room to deposit TFSA money of someone who has died.

It is surely reasonable to expect some account holders, some employees of financial institutions and others did not know all TFSA rules in the first year. Indeed, a senior CRA employee doubted me when I wrote earlier that you can withdraw contributions and investment returns one year, then contribute the same amount of money in a later year.

This flexibility makes TFSAs quite different from registered retirement savings plans. So taxpayers may have assumed — incorrectly — they could deposit and withdraw money at any time, or close accounts to switch institutions.

Some taxpayers blame their banks for failing to inform them better. A spokesperson for Revenue Minister Keith Ashfield agrees: “It’s up to the financial institution to inform their clients of the details.” But some employees would not have been as well informed as others, or assumed clients knew the rules.

Jamie Golombek, managing director, tax and estate planning as CIBC Private Wealth Management, says investors should see a financial adviser when dealing with a TFSA.

If you did not, and made a mistake, here’s what to do.

Set aside lots of time to record your month-by-month contributions and withdrawals and to decipher Form RC243-SCH-A, available at www.cra.gc.ca or by calling 1-800-959-2221. It’s a scary form.

Then attach a letter and say you are seeking administrative relief, due to a reasonable error.

“I did not know, and was not told, I should have applied for a transfer to move my money from account X (or institution X) to another.” “I did not know, and was not told, I should have waited until 2010 to replace amounts I withdrew in 2009.” Or, maybe, “I did not know I could not mix tax-free and taxable contributions in the same account.”

Workman says you should write: “I will arrange to remove the excess contributions without delay.”

jdaw@thestar.c
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