# TFSA end of the year withdrawal question



## Money4life (May 17, 2012)

Hello,

I have a TFSA with TD (e-series mutual funds) and a TFSA with Canadian Direct Financial (high interest savings account). I would like to transfer the remaining funds from CDF to TD. I wanted to do this earlier but CDF was going to charge me a $50 fee so I've elected to wait until the end of the year so I can just withdraw my money. I've never done this before but I've been told that in December, I can withdraw any amount I want from my TFSA and then re-deposit this money into another TFSA as of January 1st, plus my normal TFSA contribution for that year.

Canadian Direct Financial is not your standard bank (I can only access their accounts online) so the only way I can see doing this is transferring my money from my CDF TFSA to my CDF savings account and then transferring my CDF savings account money to my TD cheuqing account. From there, I believe I would have to create a money market mutual fund account, place my CDF TFSA money there and then finally transfer my TFSA money market account to my existing e-series TFSA account. 

To anyone who has money with Canadian Direct Financial or the TD e-series funds, does this sound right?

Also, just to clarify: Am I able to re-deposit my TFSA withdrawn money to TD with the interest that I've accrued from CDF or does it have to be just the amounts that I deposited? How would the CRA know how much interest I've accrued from my CDF TFSA if I never report it?

Thanks!


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## Potato (Apr 3, 2009)

There seem to be too many steps on the TD side. Once you get the money in your TD chequing account, you should be able to purchase e-series funds in your e-series TFSA account, pulling the money from the chequing account. If you push the money into the TFSA then the default on your account may be to have it turn into money market funds, but then that's not creating an account or transferring, if you get money market funds in your TFSA account you just do a switch transaction to get the money into the e-series funds you desire.


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## Money4life (May 17, 2012)

Potato said:


> There seem to be too many steps on the TD side. *Once you get the money in your TD chequing account, you should be able to purchase e-series funds in your e-series TFSA account, pulling the money from the chequing account.* If you push the money into the TFSA then the default on your account may be to have it turn into money market funds, but then that's not creating an account or transferring, if you get money market funds in your TFSA account you just do a switch transaction to get the money into the e-series funds you desire.


Seems like I was over-thinking the TD side. I think I was getting transferring and withdrawing/depositing TFSAs mixed up. Thanks for clarifying that portion of my post.


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## wendi1 (Oct 2, 2013)

CRA will find out from CDF that you have withdrawn this money. Don't worry about it. All of the money you have withdrawn, including the interest, will become part of your next year's contribution room.

I don't know CDF, but make sure they don't have an inactivity fee, a withdrawal fee or an account closure fee. CIBC got their stinkin' $50 from me when I moved my TFSA.

I would talk to TD before I started this. They might arrange some of it for you (and might even refund the $50 if pressed).


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## heyjude (May 16, 2009)

I am planning something similar, except that the accounts are ING and TD, respectively. I had money in the ING Streetwise Fund that had done very well and I had plans for it this month. So I withdrew it from the Streetwise Fund to "cash" within the TFSA, where there was already a couple of dollars. Then I transferred the whole amount to my Scotia checking account, which articulates with ING. 

In January I plan to set up a TFSA at TD Direct as I plan to use my TFSA for index funds and GICs and I already have an account there. The money I contribute to this TFSA will be "new". I could not do this before the end of 2013. My contribution room for 2014 will be $5,500 plus the amount that I recently withdrew in 2013. (I have contributed the maximum amount every year).


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## Money4life (May 17, 2012)

wendi1 said:


> CRA will find out from CDF that you have withdrawn this money. Don't worry about it. All of the money you have withdrawn, including the interest, will become part of your next year's contribution room.
> 
> I don't know CDF, but make sure they don't have an inactivity fee, a withdrawal fee or an account closure fee. CIBC got their stinkin' $50 from me when I moved my TFSA.
> 
> I would talk to TD before I started this. They might arrange some of it for you (and might even refund the $50 if pressed).


It's funny you mention this but the reason why I didn't transfer my CDF account to TD earlier this year was because of the $50 'TFSA Plan transferred to another Financial institution' fee that CDF was going to charge me. I talked to 5 different TD branches asking to for them to absorb the fee. Three of the branches outright said no, one said that they were going to absorb $25 and the other said that they would absorb the $50 if I opened a Direct Investing account. I have a simple e-series set up right now that doesn't require a TD Direct Investing account so that's why I didn't want to complicate things by making a pointless switch. Plus I figured that I could just do the withdrawal/deposit thing during December/January. 

There is an account closure fee for a TFSA ($50) but that only applies if I had the account for less than a year (doesn't for me). As for an inactivity fee, I'm not sure about that one. Doesn't say anything on the site but you never know. And you'd think there wouldn't be a withdrawal fee if you're technically moving the funds to a savings account within the same bank. It's definitely questions that I need to ask though.


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## Money4life (May 17, 2012)

heyjude said:


> I am planning something similar, except that the accounts are ING and TD, respectively. I had money in the ING Streetwise Fund that had done very well and I had plans for it this month. So I withdrew it from the Streetwise Fund to "cash" within the TFSA, where there was already a couple of dollars. Then I transferred the whole amount to my Scotia checking account, which articulates with ING.
> 
> In January I plan to set up a TFSA at TD Direct as I plan to use my TFSA for index funds and GICs and I already have an account there. The money I contribute to this TFSA will be "new". I could not do this before the end of 2013. My contribution room for 2014 will be $5,500 plus the amount that I recently withdrew in 2013. (I have contributed the maximum amount every year).


Good to know. These end of the year transactions definitely seem like the smart thing to do.


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## james4beach (Nov 15, 2012)

I'm doing some TFSA shuffling as well, in December. I have a GIC stupidly sitting in there and it only earns 2.0% or something, so hardly worth the TFSA room it's occupying. I'll withdraw it in December and by January will have all that room back!


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## Eclectic12 (Oct 20, 2010)

Money4life said:


> Also, just to clarify: Am I able to re-deposit my TFSA withdrawn money to TD with the interest that I've accrued from CDF or does it have to be just the amounts that I deposited?


I'm not sure why people want to complicate this ... what's being tracked is the contributions and withdrawals period (same as an RRSP).

Whether the dollars come from a deposit, interest, capital gains, dividends or whatever is irrelevant. The timing requirement is that withdrawal amounts are only added to the available TFSA contribution room the following year.

http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/tfsa-celi/wthdrwls-eng.html




Money4life said:


> How would the CRA know how much interest I've accrued from my CDF TFSA if I never report it?


CRA doesn't care about interest ... only the withdrawal dollar amount that are being tracked - not how it was earned. Then when contributions are made, the contribution dollar amount is also tracked.


Based on the time lag before over-contribution penalty letters were sent out, it appears that the financial institutions report to the CRA the contributions & withdrawals around Mar of the following year. The time lag makes is important for the individual to keep an accurate, current running total as some posts have indicated that it was close to a year after the fact (with a year's worth of penalties being charged) by the time the reporting happened & CRA sent the notification letter.

For example, open a new TFSA in Jan 2013, contribute $10K in May 2013, withdraw $5K in Dec 2013 and contribute $5K in Jan 2014 seems to have a reporting timeline where around March 2014 CRA would be notified by the financial institution that for 2013, there was a contribution of $10K and a withdrawal of $5K. The re-contribution in Jan 2014 is likely not going to be reported until Mar 2015.


Cheers


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## Eclectic12 (Oct 20, 2010)

Money4life said:


> These end of the year transactions definitely seem like the smart thing to do.


Yes ... I've used them to cash in respectable capital gains plus cash distributions to pay off my mortgage early.

Since I already had a TFSA that will hold stocks, in Jan/Feb I used the new TFSA room plus the withdrawal amount to move some stock that was down to about what I paid for it into the TFSA for a minimal capital gain. The stock rebounded in the next year or so and kept spinning off cash distributions tax free.


Cheers


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## Eclectic12 (Oct 20, 2010)

james4beach said:


> I'm doing some TFSA shuffling as well, in December.
> 
> I have a GIC stupidly sitting in there and it only earns 2.0% or something, so hardly worth the TFSA room it's occupying. I'll withdraw it in December and by January will have all that room back!


For cash in a TFSA, I think the latest I've withdrawn to my chequing account was Dec 28th (basically making sure there's a couple of bank working days to confirm the withdrawal is properly recorded). 

For that particular shuffling, I believe the cheque was deposited to the receiving bank account on Dec 30th and then the transfer from the chequing to the TFSA account was done Jan 2nd via the web interface.

All in all, a quick & relatively painless process.


Cheers


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## Guban (Jul 5, 2011)

james4beach said:


> I'm doing some TFSA shuffling as well, in December. I have a GIC stupidly sitting in there and it only earns 2.0% or something, so hardly worth the TFSA room it's occupying. I'll withdraw it in December and by January will have all that room back!


James, assuming that you can't cash out of the GIC, I have a couple of questions:
1) If you transfer the GIC out of your TFSA, what value does it come out as? Principal? Principal + interest? This makes a difference for the recontribution room for the next calendar year. Please let us know.
2) Are all of your registered options maxed out? By taking the GIC out of the TFSA, you are exposing the interest to taxation. Having it inside the TFSA is better than out, so it is not necessarily "stupidly sitting in there".


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## Eclectic12 (Oct 20, 2010)

Guban said:


> James, assuming that you can't cash out of the GIC, I have a couple of questions:
> 
> 1) If you transfer the GIC out of your TFSA, what value does it come out as? Principal? Principal + interest? This makes a difference for the recontribution room for the next calendar year. Please let us know...


Good question ... if the interest is paid at maturity, I'm leaning towards principal only but don't know.

I suspect the taxes on the interest would accrue on a prorated basis between the withdrawal date until the next anniversary. Going forward, the taxes would be back to accruing as usual.


Cheers


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## fraser (May 15, 2010)

We are planning to consolidate our TFSA's. We have a small one at our bank. They charge $150. to transfer it to another firm but they charge 0 if we withdraw it.

We were advised to withdraw the money in December and deposit it with another firm in January.


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## heyjude (May 16, 2009)

Eclectic12 said:


> Yes ... I've used them to cash in respectable capital gains plus cash distributions to pay off my mortgage early.


That's exactly what I did with my TFSA withdrawal. The mortgage was on an investment property and had over two years to run, so the payback will be increased cash flow starting immediately. And there was no fee to withdraw it from ING.


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## liquidfinance (Jan 28, 2011)

Eclectic12 said:


> I'm not sure why people want to complicate this ... what's being tracked is the contributions and withdrawals period (same as an RRSP).
> 
> Whether the dollars come from a deposit, interest, capital gains, dividends or whatever is irrelevant. The timing requirement is that withdrawal amounts are only added to the available TFSA contribution room the following year.
> 
> ...


So much confusion over such a simple product.

1) Government grants contribution room.
2) You contribute the money after tax
3) It grows inside the tfsa tax free
4) Withdrawals are free of tax. 
5) Withdrawals may be added back the following year + the additional annual contribution room. 

A few other issues such as the contribution room is gone if you are subject to capital losses but otherwise the above sums it up.


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## Eclectic12 (Oct 20, 2010)

liquidfinance said:


> So much confusion over such a simple product.


The part that puzzles me is that there does not seem to be anywhere near the confusion about the RRSP contribution limits.

Sure - the "adding back withdrawals the next year" is a new wrinkle but I don't recall anyone worrying about what made up the withdrawal dollars.




liquidfinance said:


> ... A few other issues such as the contribution room is gone if you are subject to capital losses but otherwise the above sums it up.


I'd add to point #4 that US dividends are subject to the IRS 15% withholding tax but generally, it's a good summary.


Cheers


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## coolbeans (Oct 2, 2013)

I find examples help explain how this works:

Assume I turned 18 on January 1, 2013, I would suddenly have $5500 TFSA contribution space to use. I immediately invest $5500 into my newly opened TFSA account. It's now early December and my investment, that used up my $5500 of TFSA contribution space, has since grown to $7000. I then decide to withdraw that $7000 (which includes the $1500 of growth) from my TFSA and into my chequing account. Come January 1, 2014, my available TFSA contribution space will increase by the annual $5500 *plus* any withdrawals I made from the TFSA in 2013 will be added, i.e. the $7000. So on January 1, 2014 I would have $12500 ($5500 + $7000) in TFSA contribution space to use.

Similarily, if my $5500 investment in 2013 dropped to $4000, and I withdrew it in early December, I would have $9500 ($5500 +$4000) in TFSA contribution space to use.

Note: 
In the first example, the growth of $1500 would not be taxed when I withdraw it as those gains are within a TFSA.
Similarly, in the second example, the loss in value of $1500 would not be eligible to claim as a loss in capital to offset taxation on other capital gains in investments outside the TFSA.


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## Beaver101 (Nov 14, 2011)

^ For those who have experience / made these executions (withdraw this year, recontribute next year on your TFSAs from / to different financial institutions), are there any "updated (aka year 2020)" wrinkles I should be watching for? I have never made a withdrawal or even a transfer between my TFSA accounts but thinking of consolidating them from 3 to 1.


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## Spudd (Oct 11, 2011)

No, everything is still the same. You can withdraw everything from your 2 unwanted TFSA's in December and contribute them to the 3rd TFSA in January.


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## Beaver101 (Nov 14, 2011)

Spudd said:


> No, everything is still the same. You can withdraw everything from your 2 unwanted TFSA's in December and contribute them to the 3rd TFSA in January.


 ... thanks Spudd for the response.


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## Eclectic12 (Oct 20, 2010)

Beaver101 said:


> ^ For those who have experience / made these executions (withdraw this year, recontribute next year on your TFSAs from / to different financial institutions), are there any "updated (aka year 2020)" wrinkles I should be watching for?


The wrinkle that I can think of is withdrawing from the TFSA so late in Dec that somehow the FI dates it as being a Jan withdrawal ... though that's whatever policy the FI has.

To avoid any issues, I make the withdrawal around Dec 20th (i.e. before Christmas) then make the contribution around Jan 5th.


Cheers


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## Beaver101 (Nov 14, 2011)

^ Thanks for the reminder, Eclectic12!


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## james4beach (Nov 15, 2012)

Eclectic12 said:


> The wrinkle that I can think of is withdrawing from the TFSA so late in Dec that somehow the FI dates it as being a Jan withdrawal ... though that's whatever policy the FI has.
> 
> To avoid any issues, I make the withdrawal around Dec 20th (i.e. before Christmas) then make the contribution around Jan 5th.


Good idea. Somewhat related, if you want to sell stocks and have it count for 2020, make sure you do it early enough that the settlement date is still in December.

I believe the last possible day to sell stocks/ETFs so that they count for this year is December 29. And if you plan to do something like selling + withdrawal, make sure you leave plenty of time for settlement and then withdrawal activities.

If you also have to phone into the brokerage, leave even more time. Due to COVID, the brokerages are very hard to reach these days and it could get worse. If I was trying to do something complicated like withdrawing or transferring funds, I would probably start in early December.

I'm about to start doing some USD-to-CAD conversion (tax loss selling) and I'm going to start before December 15.


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