# TFSA clarification



## Siwash (Sep 1, 2013)

I was checking out the govt website on TFSA info. It states you can contribute $5500 per spouse. But others on this site and elsewhere have claimed you can contribute $25,500 per. Which is correct? I am going to assume it's only $5,500 and that I am missing something here…. 

thanks


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## SkyFall (Jun 19, 2012)

If you were a resident of Canada and were 18 year old in 2009, until today you have a contribution room of $25 500 (if you never contributed), which mean 2009-2010-2011-2012 ($5000 each year = $20 000) and 2013 ($5500) for a total of $25 500. and if you weren't 18y/o or a canadian resident in 2009, you get the contribution room starting when you fufilled those 2 conditions. (i.e. you were a candian resident and 18y/o in 2011 you can only contribute $15500.


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## Siwash (Sep 1, 2013)

SkyFall said:


> If you were a resident of Canada and were 18 year old in 2009, until today you have a contribution room of $25 500 (if you never contributed), which mean 2009-2010-2011-2012 ($5000 each year = $20 000) and 2013 ($5500) for a total of $25 500. and if you weren't 18y/o or a canadian resident in 2009, you get the contribution room starting when you fufilled those 2 conditions. (i.e. you were a candian resident and 18y/o in 2011 you can only contribute $15500.


Got it! Thanks!

Oaky, so can i place $51,000 tomorrow into an TFSA even though 2013 is not complete? And, as of January, 2014, can I contribute an additional $5500?

Thanks again!


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## SkyFall (Jun 19, 2012)

Siwash said:


> Got it! Thanks!
> 
> Oaky, so can i place $51,000 tomorrow into an TFSA even though 2013 is not complete? And, as of January, 2014, can I contribute an additional $5500?
> 
> Thanks again!


How do you came up with $51,000? You cannot have a joint TFSA and it's not like the RESP where you can play with the spouse's contribution/tax shelter, you guys need to have a seperate one. and Yes you can contribute $5,500 for this year (2013) and on January 1st 2014 you can throw another $5,500.

If someone NEVER contributed before and fufilled the 2 conditions in 2009 the maximum they can put in a TFSA is only $25,500 until today!


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## Siwash (Sep 1, 2013)

SkyFall said:


> How do you came up with $51,000? You cannot have a joint TFSA and it's not like the RESP where you can play with the spouse's contribution/tax shelter, you guys need to have a seperate one. and Yes you can contribute $5,500 for this year (2013) and on January 1st 2014 you can throw another $5,500.
> 
> If someone NEVER contributed before and fufilled the 2 conditions in 2009 the maximum they can put in a TFSA is only $25,500 until today!


So we'd have to put the $25,500 in two separate accounts then?


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## Butters (Apr 20, 2012)

find out your limit at the Canada Tax Revenue main website
http://www.cra-arc.gc.ca/menu-eng.html
if you don't trust me link, just google Canada Tax Revenue
when you go to their site, hit register

they will ask you a few info like date of birth, SIN, and postal code and you will need your 2012 statement
it will say, how much money is on line 244 in your last tax year...

after you enter those numbers, you can see how much you are able to contribute


DO NO OVER CONTRIBUTE YOU WILL GET TAXED TO HIGH HELL

and remember its SOLO, only 1 person opens the account
your wife can make her own separate account


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## SkyFall (Jun 19, 2012)

Siwash said:


> So we'd have to put the $25,500 in two separate accounts then?


yeah! you cannot have both name under one TFSA


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## donald (Apr 18, 2011)

I second not over contributing,I just learned this the hard way!im made a mistake last year.
What they will do is take a snapshot of the day/mth and amt that is over contributed and than apply a 1% penalty.so if your 5k over every mth they will start anew and add it up,5k x12(1 year say)60k and that is what cra uses if that makes sense.
If you were 10k over they would see that as 120k in one year,prob not explaining it right.


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## Siwash (Sep 1, 2013)

SheaButters said:


> find out your limit at the Canada Tax Revenue main website
> http://www.cra-arc.gc.ca/menu-eng.html
> if you don't trust me link, just google Canada Tax Revenue
> when you go to their site, hit register
> ...



That's great info! Thanks!!!


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## Guban (Jul 5, 2011)

Siwash said:


> I was checking out the govt website on TFSA info. It states you can contribute $5500 per spouse.
> 
> thanks


Wow! That means that if I have 3 spouses, I get to contribute $16,500! :chuncky: Of course, if I don't have any spouses, that means that my limit is $0.


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## liquidfinance (Jan 28, 2011)

Siwash said:


> So we'd have to put the $25,500 in two separate accounts then?


Yes but you can move money around as you see fit. The accounts are free from attribution rules so although you would need 2 accounts with an institution you can treat it as one account of $51k value. 

Just remember any withdrawals can't be added back until the following January.


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## alingva (Aug 17, 2013)

if you have 3 spouses you contribution will not be 16500, it will be -16500


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## Eclectic12 (Oct 20, 2010)

Siwash said:


> So we'd have to put the $25,500 in two separate accounts then?


Actually, it's $25.5K *per person* that meets the two criteria (i.e. resident of Canada since 2009 and was 18+ in 2009).

How many TFSA accounts a person owns depends on what makes sense. If there are multiple TFSA accounts, the person is responsible for making sure the contributions across all TFSA accounts stay within their personal limits (same as an RRSP). For example, I am one person that qualifies for the $25.5K but I have two TFSA accounts that hold my TFSA contributions. One is for cash which only supports savings and one is for investing which supports buying stocks, bonds, GICs, MFs, ETFs etc.


Since you appear to be managing the money for two people - then at minimum, you'll need to make sure there is one TFSA opened that belongs to each. If it makes sense - you might choose to setup three or more TFSA accounts.


Cheers


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## Eclectic12 (Oct 20, 2010)

SheaButters said:


> ... they will ask you a few info like date of birth, SIN, and postal code and you will need your 2012 statement
> it will say, how much money is on line 244 in your last tax year...
> 
> after you enter those numbers, you can see how much you are able to contribute ...


It is a good idea to check ... but bear in mind there's a long lag time between updates (once a year) so once contributions start being made, it may be quite a while before this is up to date.

Since keeping track of the TFSA contribution room available is not much different than balancing a chequing account, I'd suggest that one keeps their own records and only uses CRA to spot check once in a while.




SheaButters said:


> ...DO NO OVER CONTRIBUTE YOU WILL GET TAXED TO HIGH HELL ...


 ... it is expensive but I'm not sure I'd put it that way. The standard penalty is the same as for RRSP over-contributions. 

The first difference is that RRSP contributions as well as the notification of an over-contribution are done on a much more timely basis. The second difference is that the TFSA rule changes have added a stiffer penalty so that where it is determined people are purposely over-contributing instead of an honest mistake, there is the option of a penalty of 100% of any benefit.


Cheers


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## Eclectic12 (Oct 20, 2010)

donald said:


> I second not over contributing,I just learned this the hard way!im made a mistake last year ...
> 
> If you were 10k over they would see that as 120k in one year,prob not explaining it right.


I agree it's well worth one's while to keep track of it (no different than balancing a chequing account) to avoid penalties.

However, based on CRA's example - your explaination isn't clear. Based on their example #3 at this link:
http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/tfsa-celi/txtn/xcssxmpl-eng.html#xmpl3

It's not that they "start anew" but that the penalty is applied per month based on the amount in that month that was over-contributed.

So if nothing has been done to reduce the $10K over-contribution for a year, the formula would be:
$10K x 1% x 12 month = $1200 in penalties.


Note that the financial institutions are likely reporting once a year in Mar of the following year or so, when CRA is busy so if the over-contribution happens early in the year, if one is depending on CRA to tell them - there's already many months the penalty is applied by the time CRA's letter shows up.


Cheers


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## Siwash (Sep 1, 2013)

Neither my wife or I have ever contributed a penny to a TFSA. Never opened one..

So, I think we can contribute 25,500 each.


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## donald (Apr 18, 2011)

Which essentially is 120k they are basing it off of.It might be worth noting(i wouldnt do this myself)One could outstrip the penalty amt in a one year cycle with a over contribution.Obviously not something one would do but i did mistakenly,lucky(bought mtl/bns)On a 4600 over contribution in 2012 and paid the 1% penalty(8 mths)my penalty was something like 340ish my cap appr was +1200 on that 4600.00(not including a few divs-tax sheltered moving forward)Almost better than a non reg it would seem(if i sold and had to pay taxes)
If that makes sense,the penalty is actually not that bad considering(1 %)again i'm prob not explaining this right (layman) not a accountant.


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## Eclectic12 (Oct 20, 2010)

donald said:


> Which essentially is 120k they are basing it off of.


I think I understand now ... what you are calling $120K is really the $10K that is not dealt with times the twelve months.




donald said:


> It might be worth noting(i wouldnt do this myself) One could outstrip the penalty amt in a one year cycle with a over contribution ...
> If that makes sense,the penalty is actually not that bad considering(1 %)again i'm prob not explaining this right (layman) not a accountant.


If I understand correctly - you are saying that the gain made on the over-contribution can outweigh the 1% penalty and work out to one's benefit.

This is true but it is important to note that this likely only worked for you as the amounts are likely too small to flag your over contribution as a deliberate one.

This situation is why in late 2009 proposed TFSA rule changes added the option for CRA to review the transaction, decide that this was deliberate instead of an honest mistake and trigger the more costly penalty where income reasonably attributable to deliberate over contributions will be taxable at 100%.

http://www.fin.gc.ca/n08/09-099-eng.asp


The newspaper article explaining the rules used the example of someone over-contributing by $100K so that there was $105K in the TFSA. If they bought a stock that doubled in eight months, the $105K becomes $210K, they withdraw $100K plus pay the 1% penalty of $8K and are left with $110K in the TFSA tax free.


Bottom line is that it is a good thing you aren't planning on doing this ... 


Cheers


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