Personal Finance

Question: TFSA withdrawal vs TFSA Reversal

  • Last Updated:
  • Apr 29th, 2018 11:36 am
[OP]
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Jul 25, 2015
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Antigonish

Question: TFSA withdrawal vs TFSA Reversal

One agent from CIBC called me a few days back and convinced me to open a TFSA account with them and transfer all of my savings to the newly opened TFSA and he gave me the option if I don't like I can "reverse" my TFSA within 14 days of opening the TFSA. After opening the TFSA account on CIBC I saw there are plenty of better options in the market. So I chose to reverse my account and now I want to contribute them in my Tangerine TFSA account. My question is if TFSA reversal is different than TFSA withdrawal? After being reversed will it still be considered as my TFSA contribution for this year?
FYI, my contribution limit is 15,000 and I contributed around 12,000 and then I reversed it. And now I am planning to contribute that 12,000 to my Tangerine TFSA if my contribution limit allows me.
15 replies
Deal Fanatic
Apr 11, 2012
5822 posts
3079 upvotes
Winnipeg
never heard of it...
Deal Addict
Jan 30, 2012
1677 posts
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TORONTO
You can make a transfer from one TFSA account to another TFSA account, this has no tax consequences, provided that you fill out the correct form:

http://www.cra-arc.gc.ca/tx/ndvdls/tpcs ... l-eng.html

You can also withdraw from one TFSA and contribute to another TFSA account, this can have tax consequences:

http://www.cra-arc.gc.ca/tx/ndvdls/tpcs ... s-eng.html
[OP]
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Jul 25, 2015
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M8Rxmjsik wrote: You can make a transfer from one TFSA account to another TFSA account, this has no tax consequences, provided that you fill out the correct form:

http://www.cra-arc.gc.ca/tx/ndvdls/tpcs ... l-eng.html

You can also withdraw from one TFSA and contribute to another TFSA account, this can have tax consequences:

http://www.cra-arc.gc.ca/tx/ndvdls/tpcs ... s-eng.html
The first one costs some money- $100 for CIBC. The second one is my concern whether I already used up my contribution limit and contributing again will be over contribution or as they said it's not "withdrawal" it's "reversal", so that 12,500 won't be considered as my contribution at all?
[OP]
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Jul 25, 2015
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b31770 wrote: You've been had... people shouldn't pick up unsolicited phone calls.

http://www.cra-arc.gc.ca/tx/ndvdls/tpcs ... s-eng.html

I think your reversal was a sugarcoated withdraw.
I called them again, they said it won't effect my contribution limit. But I am not sure if I should trust that. CRA said they have nothing to deal with it, it depends on how the FI reports to them.
Deal Addict
Jan 30, 2012
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TORONTO
Pritam wrote: The first one costs some money- $100 for CIBC.
The fees charged by CIBC have nothing to do with the tax rules for TFSAs set by the govt.

And as others pointed out, "reversals" don't exist.

You can do a TFSA transfer, or a TFSA withdrawal.
Deal Fanatic
Jan 21, 2014
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Just curious, do you need to fill any form to withdraw from TSFA or just transfer the funds out to your savings/chequing account?
[OP]
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Jul 25, 2015
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mkl38s wrote: Just curious, do you need to fill any form to withdraw from TSFA or just transfer the funds out to your savings/chequing account?
It was all over telephone banking. No form or what so ever. They set up my account over telephone and took my money out of my regular saving account to the TFSA. It took 2 days. And when I decided to cancel the account I requested them over telephone. They told me it would not impact my contribution limit as upon my request they will run an investigation and then they "reversed" my money to where it was before. Again it took 2-3 business days.
Deal Addict
Nov 22, 2012
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VANCOUVER
Pritam wrote: I called them again, they said it won't effect my contribution limit. But I am not sure if I should trust that. CRA said they have nothing to deal with it, it depends on how the FI reports to them.
http://www.cra-arc.gc.ca/tx/ndvdls/tpcs ... n-eng.html

Read the CRA page and tell me if your situation qualifies.

A) it's not between your tfsa accounts
B) it's not a direct transfer

If you think you're situation is different, I'd love to hear the reasoning as my interpretation could always be wrong.
Deal Addict
Dec 28, 2009
1305 posts
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Montreal, QC
The OP/CIBC is simply referring to cancelling a contribution.

Imagine you want to transfer $10,000 to your TFSA but you have fat fingers and accidentally transfer $100,000... or you have 10 different accounts and accidentally transfer to your TFSA instead of transferring to a line of credit. Mistakes happen, contributions can be cancelled... but there's no real benefit to doing this on purpose.

Keep in mind contributions are cancelled "as of", meaning the cancellation is backdated to the date of the deposit so you will not receive or get any tax free interest on your deposit (if this is a bank/savings account style TFSA). With a brokerage TFSA account, a contribution can only be cancelled if the funds were not used. For example, you can't transfer in money, trade with the funds, and then decide you want the deposit cancelled. It is definitely possible to cancel a contribution, but each institution will have different policies, in CIBC's case, it's probably 14 days.

It looks like the CIBC rep was using the fact that contributions can be cancelled as sales tactic. You open and fund the account, he gets whatever credit for it, and then you have a "buyers remorse" opt out clause. Shady sales tactics? Probably. On side with the CRA? Yes. Will it have an effect you? If CIBC did in fact code it as a cancellation and did not process it as a withdrawal, it won't affect your contribution room.
[OP]
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Jul 25, 2015
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habsfan321 wrote: The OP/CIBC is simply referring to cancelling a contribution.

Imagine you want to transfer $10,000 to your TFSA but you have fat fingers and accidentally transfer $100,000... or you have 10 different accounts and accidentally transfer to your TFSA instead of transferring to a line of credit. Mistakes happen, contributions can be cancelled... but there's no real benefit to doing this on purpose.

Keep in mind contributions are cancelled "as of", meaning the cancellation is backdated to the date of the deposit so you will not receive or get any tax free interest on your deposit (if this is a bank/savings account style TFSA). With a brokerage TFSA account, a contribution can only be cancelled if the funds were not used. For example, you can't transfer in money, trade with the funds, and then decide you want the deposit cancelled. It is definitely possible to cancel a contribution, but each institution will have different policies, in CIBC's case, it's probably 14 days.

It looks like the CIBC rep was using the fact that contributions can be cancelled as sales tactic. You open and fund the account, he gets whatever credit for it, and then you have a "buyers remorse" opt out clause. Shady sales tactics? Probably. On side with the CRA? Yes. Will it have an affect you? If CIBC did in fact code it as a cancellation and did not process it as a withdrawal, it won't affect your contribution room.
Thanks habsfan321. Now it makes sense. Because I earned 6-7 dollars as interest in between opening and cancelling the account. But after cancelling I just got back my original money where it was before(regular savings account). I didn't receive the interest that I earned. I think I am safe to contribute to TFSA again this year. Thank you again!

Another thing: when I requested to cancel the account they told me(the rep talked to her supervisor because I insisted to make sure) it would not impact my contribution limit as upon my request they will run an investigation as a part of the process and then they "reversed" my money. Now this 'investigation' part makes more sense. It was considered as mistake or something like that and so they decided to cancel it that way.
[OP]
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Jul 25, 2015
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Well. It's pretty clear that none of them is my situation. because a) my money was reversed from TFSA to regular savings, clearly not between two TFSA acc. b) it was not a direct transfer as well. My case is different which is well explained by habsfan321. His comment is just below yours (comment#11).
Newbie
Feb 25, 2018
12 posts
7 upvotes
Going to bump this up in case anyone can help compare my case with this one. @habsfan321

I authorized a stop on my TFSA PAC automatic payments via email to my advisor in early March 2018.

Since I am in the process of transferring to a different broker, Questrade, I put my remaining room for 2018 into the new TFSA (that I am going to transfer my old one into).

Low and behold, my advisor didn't do as I requested and not only took another $200 for my old TFSA but they used it to purchase mutual funds against my authorization.

My advisor said they would 'reverse' the $200 right away in over contribution. She was really not sure how this would work and now I am getting concerned because it has been taking 4+ days to complete and now I think maybe it isn't possible to do because she already bought a mutual fund with this money.

Should I do anything else? I am considering just withdrawing $200 from Questrade (new TFSA) right now to be safe.

Thanks for your help!
Deal Guru
Aug 14, 2007
12233 posts
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Pritam wrote: One agent from CIBC called me a few days back and convinced me to open a TFSA account with them and transfer all of my savings to the newly opened TFSA and he gave me the option if I don't like I can "reverse" my TFSA within 14 days of opening the TFSA. After opening the TFSA account on CIBC I saw there are plenty of better options in the market. So I chose to reverse my account and now I want to contribute them in my Tangerine TFSA account. My question is if TFSA reversal is different than TFSA withdrawal? After being reversed will it still be considered as my TFSA contribution for this year?
FYI, my contribution limit is 15,000 and I contributed around 12,000 and then I reversed it. And now I am planning to contribute that 12,000 to my Tangerine TFSA if my contribution limit allows me.
Get paperwork stating it as a cancellation/reversal just in case the CRA decides to give you the ol’ screw job come tax time.

Personally I’ve never heard of reversing a transaction going into a TFSA, but then again I’d guess it’s not too common either.

Or just transfer your TFSA to tangerine using the proper methods.
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Mar 10, 2018
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does it matter?
Pritam wrote: I called them again, they said it won't effect my contribution limit. But I am not sure if I should trust that. CRA said they have nothing to deal with it, it depends on how the FI reports to them.
It is persons job to take care of TFSA and limits and withdrawals etc...etc..
Its never job of any bank employee. They might be wrong or interpret wrong. The onus is always on you.
Tried new coffee and doughnut. Found same old stale thing. expected bill of six bucks but it was 600 million. Big mistake so the guy said don't worry it is on the house. going back to McD.

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