Personal Finance

tsfa over contribution question

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  • Jul 24th, 2020 8:38 am
[OP]
Deal Addict
Feb 4, 2003
3262 posts
1561 upvotes

tsfa over contribution question

So my dad got some bad advice from TD and over contributed to this TD TSFA account last year and only till today he got a letter that he owes $250ish in penalty and he is still $500ish over contributed.

The letter only says that he needs to pay off the $250ish penalty by Sept 1st else more late fees, but there wasn't any mention he needs to withdrawal the $500ish over contribution still.

I'm assuming he has to withdrawal the $500ish immediately to avoid further penalty? odd why the CRA wouldn't just mention that in the letter.

Any advice on this?

Thanks.
9 replies
Newbie
May 23, 2011
91 posts
110 upvotes
So there is a form somewhere that you can fill out asking for leniency.

I did it one year where I overcontributed by 3k and asked them for forgiveness. I paid the approximate penalty and then 6 months later they refunded me.

So id say yes pull out the extra.
If you could get the bank to admit they F’d up in a letter, You could ask cra for forgiveness. See what they say.

Those banks are the worst. They put huge pressure on tellers to open accounts. They tricked my mom into opening a TFSA and making an opening deposit. Even though I already maxed it out for her that year. I had to call in and yell at the bank manager to get it reversed.
[OP]
Deal Addict
Feb 4, 2003
3262 posts
1561 upvotes
JoloLo wrote: So there is a form somewhere that you can fill out asking for leniency.

I did it one year where I overcontributed by 3k and asked them for forgiveness. I paid the approximate penalty and then 6 months later they refunded me.

So id say yes pull out the extra.
If you could get the bank to admit they F’d up in a letter, You could ask cra for forgiveness. See what they say.

Those banks are the worst. They put huge pressure on tellers to open accounts. They tricked my mom into opening a TFSA and making an opening deposit. Even though I already maxed it out for her that year. I had to call in and yell at the bank manager to get it reversed.
In the CRA letter, it says "Our records shows that we previously notified you about making excess contribution" which i don't think is true, need to figure out what that is all about since the only reason i can see them mentioning that so we don't ask for forgiveness.

The TD advisor doesn't know that my dad maxed out his contribution somewhere else and question my Dad why not move his money to a TFSA buying some TD funds errr. We checked his CRA account and looks like TD got him to move 6k in Jan and then another 12k in Sept. WTF wrong with TD. How do they think my dad would have 18K TSFA room, they prey on seniors and my dad just took their words not knowing better.
Deal Fanatic
Jan 19, 2017
7199 posts
4211 upvotes
zzricezz wrote: In the CRA letter, it says "Our records shows that we previously notified you about making excess contribution" which i don't think is true, need to figure out what that is all about since the only reason i can see them mentioning that so we don't ask for forgiveness.

The TD advisor doesn't know that my dad maxed out his contribution somewhere else and question my Dad why not move his money to a TFSA buying some TD funds errr. We checked his CRA account and looks like TD got him to move 6k in Jan and then another 12k in Sept. WTF wrong with TD. How do they think my dad would have 18K TSFA room, they prey on seniors and my dad just took their words not knowing better.
Did you dad fill out a transfer form to ask TD to do the transfer? if he took the money from one TFSA himself and put it into TD in the same year and he had no more contribution room for that year, then he had to wait until next year to put it into TD. My guess is that he took the money out from the other TFSA himself without TD did the transfer for him. If he asked TD to do the transfer(i.e. fill out the transfer form), then there shouldn't be any overcontribution.
If CRA is correct that it sent a letter to him before, then the overcontribution was not from last year, but before that.
You have said it correctly 'The TD advisor doesn't know that my dad maxed out his contribution somewhere else'. The bank has no way of knowing what his contribution room is. it is up to each person to keep track of that. If it is not ok to do it, then he should tell the bank that. If a bank employee is smart & responsible, he should know the TFSA rule and ask a customer about his contribution room info. But the employee doesn't have to ask that kind of question.
The penalty is 1% per month. A $500 overcontribution would be $5 per month or $60 a year. $250 penalty would be more than 4 years. if he has CRA Myacct access, he can check to see if a letter was sent to him before about this overcontribution . Maybe he did receive the letter before, but didn't understand or pay attention and just threw it away, or maybe he moved and didn't notify CRA before the letter was sent so the letter was sent to the old address.
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Sep 14, 2012
2361 posts
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Montreal, QC
JoloLo wrote: Those banks are the worst. They put huge pressure on tellers to open accounts. They tricked my mom into opening a TFSA and making an opening deposit. Even though I already maxed it out for her that year. I had to call in and yell at the bank manager to get it reversed.
I don't work in the banking industry nor am I a financial institution fanboy nor am I a financial institution hater and I don't consider your example, the bank's mistake. It is your mother's and/or your mistake. The bank has no idea of what contributions were made and what contribution room is left. They can "pressure" someone in opening up a TFSA account or credit card but the person they are speaking with has to agree with it. When I visit my local TD Canada Trust and go to the teller for a teller related service, after they look at my balances/investments, they often (75% of the time) will say "I notice you don't have a credit card" or "I notice you don't have a credit card with us" and then they try to get me to sign up with their credit card. I tell them "I already have a few credit cards but not with TD Canada Trust since none of your cards appeal to me". Likewise with TD Canada Trust's overdraft protection. I am informed that I'm approved for it and they ask me to sign up for it when I visit my branch but I don't agree with it since it carries a monthly charge regardless of whether it is actually used or not.

In January, when I make my TFSA contribution for the year, I will put 90% of the year's contribution with TD Canada Trust. The investment specialist will then tell me that the contribution limit for the year is $6000 (for example this year) when they notice that I have more than $6000 in the account. I then tell them I've already contributed the 10% at another institution. If I were to listen to them and invest the $6000 with them, I would have over contributed and I wouldn't blame them for it since the bank has no idea about how much I contributed to my TFSA or RSP or any type of investment for that year.

If you make contributions for someone else (such as in your case), the problem lies with you as well as the other person.
[OP]
Deal Addict
Feb 4, 2003
3262 posts
1561 upvotes
ml88888888 wrote: Did you dad fill out a transfer form to ask TD to do the transfer? if he took the money from one TFSA himself and put it into TD in the same year and he had no more contribution room for that year, then he had to wait until next year to put it into TD. My guess is that he took the money out from the other TFSA himself without TD did the transfer for him. If he asked TD to do the transfer(i.e. fill out the transfer form), then there shouldn't be any overcontribution.
If CRA is correct that it sent a letter to him before, then the overcontribution was not from last year, but before that.
You have said it correctly 'The TD advisor doesn't know that my dad maxed out his contribution somewhere else'. The bank has no way of knowing what his contribution room is. it is up to each person to keep track of that. If it is not ok to do it, then he should tell the bank that. If a bank employee is smart & responsible, he should know the TFSA rule and ask a customer about his contribution room info. But the employee doesn't have to ask that kind of question.
The penalty is 1% per month. A $500 overcontribution would be $5 per month or $60 a year. $250 penalty would be more than 4 years. if he has CRA Myacct access, he can check to see if a letter was sent to him before about this overcontribution . Maybe he did receive the letter before, but didn't understand or pay attention and just threw it away, or maybe he moved and didn't notify CRA before the letter was sent so the letter was sent to the old address.
They saw my dad had cash in his saving account so they "advised him to move it into a TSFA account", They got my dad to move $18k into a TD mutual fund which caused him to be $6.5k over so once Jan hit, then it still over by $500.
[OP]
Deal Addict
Feb 4, 2003
3262 posts
1561 upvotes
lmcjipo wrote: I don't work in the banking industry nor am I a financial institution fanboy nor am I a financial institution hater and I don't consider your example, the bank's mistake. It is your mother's and/or your mistake. The bank has no idea of what contributions were made and what contribution room is left. They can "pressure" someone in opening up a TFSA account or credit card but the person they are speaking with has to agree with it. When I visit my local TD Canada Trust and go to the teller for a teller related service, after they look at my balances/investments, they often (75% of the time) will say "I notice you don't have a credit card" or "I notice you don't have a credit card with us" and then they try to get me to sign up with their credit card. I tell them "I already have a few credit cards but not with TD Canada Trust since none of your cards appeal to me". Likewise with TD Canada Trust's overdraft protection. I am informed that I'm approved for it and they ask me to sign up for it when I visit my branch but I don't agree with it since it carries a monthly charge regardless of whether it is actually used or not.

In January, when I make my TFSA contribution for the year, I will put 90% of the year's contribution with TD Canada Trust. The investment specialist will then tell me that the contribution limit for the year is $6000 (for example this year) when they notice that I have more than $6000 in the account. I then tell them I've already contributed the 10% at another institution. If I were to listen to them and invest the $6000 with them, I would have over contributed and I wouldn't blame them for it since the bank has no idea about how much I contributed to my TFSA or RSP or any type of investment for that year.

If you make contributions for someone else (such as in your case), the problem lies with you as well as the other person.
for a typical educated person yes i would agree, but you do know a lot of the seniors aren't, they probably don't know half of what is being advised to them, they are being pitched with the benefits like tax free, you not loosing anything, you earn this, etc.

Why do you think the seniors are the ones scammer are preying on? Usually that why i help my dad manage this type of things but for whatever reason he didn't consult me that time and we move on from this.
Newbie
May 23, 2011
91 posts
110 upvotes
zzricezz wrote: for a typical educated person yes i would agree, but you do know a lot of the seniors aren't, they probably don't know half of what is being advised to them, they are being pitched with the benefits like tax free, you not loosing anything, you earn this, etc.

Why do you think the seniors are the ones scammer are preying on? Usually that why i help my dad manage this type of things but for whatever reason he didn't consult me that time and we move on from this.
Exactly this, they didn’t even advise her to check her limit. They just told her to do it without advising her of the consequences.

By virtue of being on this forum, most people here are the kind of people who are aware of their financial situation. The our parents generation grew up very differently. Unless their professional was directly tied to technology or finance, I bet most seniors would be lost in today’s world.

Anyways, not gonna argue on the internet.

To OP, try the letter. I’m sure they’re more sympathetic to seniors if you explain the situation. I know some government workers in these situations are actually very reasonable and sympathetic.

Good luck.
Deal Fanatic
Jan 19, 2017
7199 posts
4211 upvotes
zzricezz wrote: They saw my dad had cash in his saving account so they "advised him to move it into a TSFA account", They got my dad to move $18k into a TD mutual fund which caused him to be $6.5k over so once Jan hit, then it still over by $500.
First I thought TD told him To move his existing TFSA from another bank to TD. That is not the case now. He just put more money into TD TFSA directly from a non TFSA acct.
Also Originally you said he maxed out his contribution room. But now you said TD got him to put 18k in TD TFSA, but only ended up with &6.5k over. So he actually had $11.5k contribution room and didn’t max out his contribution room then.
Like other posters had said, it is each person’s duty to know what you are doing with your money or life in general. TD didn’t force him to put money in. I am sure they just suggested or like you said advised to him to do that. If TD promised or told him something that is not true, then it is a different story.
Since the over contribution is only $6500. It was part of the $12k contribution from Sept. that caused it. At 1% penalty per month, it would be $65 per month. So 4 months from Sept to Dec. would be $260. Not just seniors who don’t know all the rules about TFSA. Even young people make mistakes too.
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Sep 14, 2012
2361 posts
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Montreal, QC
ml88888888 wrote: Like other posters had said, it is each person’s duty to know what you are doing with your money or life in general. TD didn’t force him to put money in. I am sure they just suggested or like you said advised to him to do that. If TD promised or told him something that is not true, then it is a different story.
Since the over contribution is only $6500. It was part of the $12k contribution from Sept. that caused it. At 1% penalty per month, it would be $65 per month. So 4 months from Sept to Dec. would be $260. Not just seniors who don’t know all the rules about TFSA. Even young people make mistakes too.
I agree with you 100%.

It is up to the person regardless of age to understand their investment and the rules concerning them. Also, if someone is maxing out another person's TFSA, information should have been passed to the other person to make sure that he/she understands that this was done and that the person has no contribution room left for the year.

I am the first person to blame banks for errors that they make but the TFSA contributions for the most part are errors done by the investor

Similarly, a bank can tell someone that their GIC investment is only earning 1.00% which isn't much and they can do much better with mutual funds or ETFs. The person without knowing anything about ETFs and mutual funds then decides to invest in highly volatile sector funds as he/she sees past returns over 10% and the investment drops by over 10% this current calendar year due to the COVID-19 issue. I see this as the person's mistake (regardless of the person's age) for investing in something that he/she knew nothing about.

I wasn't privy to the conversation at the bank and as the saying goes, there are 3 sides to every story but I feel that people need to take responsibility for their own actions.

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