TFSA questions

[Rommel]

Hello all!

I hope you are well. I have a few questions regarding my TFSA and a constant worry about being "dinged" for over-contributions.

According to what I have been able to find through my research, as of January 1st 2012 (this year, already passed) an individual who did not open a TFSA account should have $20 000 in unused contribution room. Now, how does this apply to say an individual who opened a TFSA account in September of 2011 and only placed in $1 000 for the year. Could, say, that individual still contribute $19 000 throughout 2012 to a max of $20 000 for the 2012 year?

Here is a clear-cut example. I opened my TFSA at Questrade in September 2011 and in November 2011 I deposited $1 000. This year I have contributed another $16 000, all within September 2012. That should mean I have $3 000 left over total (taking into consideration my unused room [$20 000 = $1 000 + $16 000 - X where X = $3 000). Is this correct? I am not worried about the withdrawal factor as I know you have to wait a year for that and I haven't made any withdrawals (and do not plan to for a long time).

Also, where can I find out the information about how to "declare" this for tax purposes? Is there a form that I need to have when I file my taxes?

Answers would greatly alleviate my concerns and uncertainty over the matter because I don't want to break any rules and I would very much like to top up the account in a legal and proper manner.

Thanks for taking the time to read this and if my examples are not clear or anyone requires further clarity, please don't hesitate to ask!

Bless your hearts!

[Toronto.gal]

Welcome back to the forum Rommel!

- The $20K for the last 4 years is assuming you were 18+ in 2009.
- Unused contributions are carried forward and accumulate indefinitely [including withdrawals, but not in the same year].
- All investment income is tax-free.

Tax payable on excess TFSA amount:
http://www.cra-arc.gc.ca/tx/ndvdls/t.../txtn-eng.html

http://taxtips.ca/tfsa.htm

[Rommel]

Thanks Toronto.gal!

Bless your heart!

[Eclectic12]

+1 to what Toronto.gal wrote.

IMO, it is best to keep a running total - just like one does when balancing a chequing account. That way, you are know at any given time what is available to you. You will have to adjust the totals on Jan 1 of each year to add the new yearly contribution amount plus any previous year withdrawals but most of the time, it is simple math to subtract the contributions as they happen.



Cheers