# CRA fined me for TFSA double take



## Gypseas (Dec 15, 2015)

Hello all,
I got a new mortgage with my bank and was given a $1000 if I opened a TFSA account with them and kept it for a year or something like that, I can't remember the exact terms. I was new at notion of TFSA but I knew my annual limit of around 60k as I never contributed before and it is cumulative. That year I ended up adding more money to same account to around 52K. The problem was that the bank was only paying some dismal amount as interest so I decided to put the money into a TFSA account with an on-line brokerage. I withdraw the 52K and put them into said TFSA account with the brokerage firm... Well now it gets interesting as CRA says that I over contributed to TFSA by almost double (120K) as they looked and saw the same money contributed twice in the same year and fined me some 3k.
Is there any chance that one could contest this fine as obviously the same money were contributed and I don't feel it is a fair rule...
Thank you for any advice


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## Money172375 (Jun 29, 2018)

Withdraw the excess funds immediately so the penalties will not continue to grow. Then write a letter to CRA explaining what happened and wait for a response.

some people may advise to pay the penalty and then appeal as a sign of good faith.


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## Gypseas (Dec 15, 2015)

There are no excess funds as I withdrew the 52k from one TFSA account and contributed the same 52k to another TFSA account. I did pay the fine right away to almighty CRA... owing them money is never a good thing.

Good idea on writing them to explain, thanks for that


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## newfoundlander61 (Feb 6, 2011)

Money172375 said:


> Withdraw the excess funds immediately so the penalties will not continue to grow. Then write a letter to CRA explaining what happened and wait for a response.
> 
> some people may advise to pay the penalty and then appeal as a sign of good faith.


Do exactly as indicated in this post. Good advice.


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## P_I (Dec 2, 2011)

Gypseas said:


> The problem was that the bank was only paying some dismal amount as interest so I decided to put the money into a TFSA account with an on-line brokerage. I withdraw the 52K and put them into said TFSA account with the brokerage firm... Well now it gets interesting as CRA says that I over contributed to TFSA by almost double (120K) as they looked and saw the same money contributed twice in the same year and fined me some 3k.


Unfortunately this is one of the major gotcha's with the TFSA contribution rules. You might want to read Definitions for TFSA - Canada.ca and Contributions - Canada.ca to understand the contribution limits and how they are impacted by withdrawals. You should have transferred the TFSA between financial institutions to avoid this problem. 



CRA said:


> *How to know your TFSA contribution room*
> The TFSA contribution room is the total of all of the following:
> 
> 
> ...




Bottom line that everyone should understand is be careful with withdrawals. The amount withdrawn only gets added back to your contribution limit the following year. 

This article, The CRA gives a chilling assessment on accidental TFSA overcontributions | Financial Post , might be helpful for ideas on how to approach CRA to get the penalty waived.


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## Beaver101 (Nov 14, 2011)

^


> Bottom line that everyone should understand is be careful with withdrawals. The amount withdrawn only gets *added back to your contribution limit the following year.*


 ... I think that's what the OP didn't get. Money's post#2 is an immediate solution to stop the interests from piling.


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## ian (Jun 18, 2016)

Gypseas said:


> Hello all,
> I got a new mortgage with my bank and was given a $1000 if I opened a TFSA account with them and kept it for a year or something like that, I can't remember the exact terms. I was new at notion of TFSA but I knew my annual limit of around 60k as I never contributed before and it is cumulative. That year I ended up adding more money to same account to around 52K. The problem was that the bank was only paying some dismal amount as interest so I decided to put the money into a TFSA account with an on-line brokerage. I withdraw the 52K and put them into said TFSA account with the brokerage firm... Well now it gets interesting as CRA says that I over contributed to TFSA by almost double (120K) as they looked and saw the same money contributed twice in the same year and fined me some 3k.
> Is there any chance that one could contest this fine as obviously the same money were contributed and I don't feel it is a fair rule...
> Thank you for any advice


Of course it is fair. IF there was no penalty everyone would be overcontributing to their TFSA. Nor would people who have overcontributed have any incentive to resolve their error.

Follow the advice above and move forward.


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## AltaRed (Jun 8, 2009)

Gypseas said:


> There are no excess funds as I withdrew the 52k from one TFSA account and contributed the same 52k to another TFSA account. I did pay the fine right away to almighty CRA... owing them money is never a good thing.
> 
> Good idea on writing them to explain, thanks for that


AS already explained, you cannot withdraw $X from one TFSA and contribute $X to another TFSA in the same year. You have to wait until the following calendar year. The rules are well known and clear. As P_I explained, you should have done a TFSA transfer between institutions. 

Write the letter explaining your faux pas about being rather dumb not following (knowing about) the rules and plead forgiveness. Plead as much stupidity as you can. CRA has no reason to sympathize but there is a remote chance they might relent and return some/all of the fine.


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## ian (Jun 18, 2016)

Whining and winging on this forum will not solve your problem. 

You need to take the initiative and move forward to resolve this. It is hardly rocket science.


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## Gypseas (Dec 15, 2015)

ian said:


> Of course it is fair. IF there was no penalty everyone would be overcontributing to their TFSA. Nor would people who have overcontributed have any incentive to resolve their error.
> 
> Follow the advice above and move forward.


Ian
I suppose you have your opinion and I have mine about what fairness is. If you read the post there was no overcontributing but rather an un-informed move as 52k came out and the same 52k went in funny enough within the same institution.



ian said:


> Whining and winging on this forum will not solve your problem.
> 
> You need to take the initiative and move forward to resolve this. It is hardly rocket science.


I was hoping we are all adults here and your response proves the contrary. I was asking for advice and if you have nothing nice to say or constructive advice then STFU.

I usually don't take the time to respond to moronic responses yet here we are.

cheers


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## Gypseas (Dec 15, 2015)

AltaRed said:


> AS already explained, you cannot withdraw $X from one TFSA and contribute $X to another TFSA in the same year. You have to wait until the following calendar year. The rules are well known and clear. As P_I explained, you should have done a TFSA transfer between institutions.
> 
> Write the letter explaining your faux pas about being rather dumb not following (knowing about) the rules and plead forgiveness. Plead as much stupidity as you can. CRA has no reason to sympathize but there is a remote chance they might relent and return some/all of the fine.


I agree it was a dumb move (un-informed), hopefully they are in a good mood today and I get to keep my hard earned $$
Thanks for taking the time
cheers


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## Gypseas (Dec 15, 2015)

P_I said:


> Unfortunately this is one of the major gotcha's with the TFSA contribution rules. You might want to read Definitions for TFSA - Canada.ca and Contributions - Canada.ca to understand the contribution limits and how they are impacted by withdrawals. You should have transferred the TFSA between financial institutions to avoid this problem.
> 
> 
> 
> ...


Live and learn I suppose, this one came at $3K 
Thanks for your input.

cheers


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## P_I (Dec 2, 2011)

Gypseas said:


> If you read the post there was no overcontributing but rather an un-informed move as 52k came out and the same 52k went in funny enough within the same institution.


In that case I would also have a conversation with the financial institution. Did you interact with any of their staff? If so, I'd ask them why they allowed this when they should have understood the CRA's position and rules. Without a doubt they should have recommended/insisted that you transfer the TFSA rather than withdraw and re-deposit it.


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## bgc_fan (Apr 5, 2009)

P_I said:


> In that case I would also have a conversation with the financial institution. Did you interact with any of their staff? If so, I'd ask them why they allowed this when they should have understood the CRA's position and rules. Without a doubt they should have recommended/insisted that you transfer the TFSA rather than withdraw and re-deposit it.


I would cut the staff slack on this. If a customer comes in to empty out their TFSA account, and the staff asks why, 9 times of out 10, the response is going to be "none of your business, just give me the money". So, I doubt anyone would ask unless the customer said upfront what they plan on doing.


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## P_I (Dec 2, 2011)

bgc_fan said:


> I would cut the staff slack on this. If a customer comes in to empty out their TFSA account, and the staff asks why, 9 times of out 10, the response is going to be "none of your business, just give me the money". So, I doubt anyone would ask unless the customer said upfront what they plan on doing.


Generally I would concur it would be none of their business, but the OP stated the TFSA amount was moved *within the same institution*. That's what struck me as odd.


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## Gypseas (Dec 15, 2015)

Unfortunately was done all on line, I take full responsibility for that one...

I am banking with Coast Capital and they have some affiliation with Qtrade. I withdrew from a TFSA account with Coast Capital to a personal account and then transferred to Qtrade as a bill payment not realizing that would be a boo boo

cheers


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## P_I (Dec 2, 2011)

Gypseas said:


> Unfortunately was done all on line, I take full responsibility for that one...


Kudos to you for taking responsibility and seeing this as a learning experience. Hopefully CRA will see this for what it was, an innocent error based on lack of knowledge and reverse the penalty for you.


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## gardner (Feb 13, 2014)

Gypseas said:


> I suppose you have your opinion and I have mine about what fairness is.


In this instance, the only opinion that really counts is that of the courts, and they have sided against you in prior cases. If the CRA doesn't forgive you out of kindness -- which is possible, if unlikely -- you won't otherwise have a leg to stand on.


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## Money172375 (Jun 29, 2018)

bgc_fan said:


> I would cut the staff slack on this. If a customer comes in to empty out their TFSA account, and the staff asks why, 9 times of out 10, the response is going to be "none of your business, just give me the money". So, I doubt anyone would ask unless the customer said upfront what they plan on doing.
> 
> “it’s none of your business (noyb)”…….how many times have I heard that!
> 
> ...


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## Eclectic21 (Jun 25, 2021)

Gypseas said:


> There are no excess funds as I withdrew the 52k from one TFSA account and contributed the same 52k to another TFSA account ...


Some of it is an TFSA overcontribution.

The $52K withdrawn is added back as contribution room _the following calendar year_.

Withdraw in late Dec then contribution to the other TFSA in Jan the next - it's all good as the same $$ are added back as contribution room.

Withdrawing then contribution to another TFSA in the same calendar year means needing TFSA contribution room for $52K.

Assuming your $60K TFSA contribution room is correct ... the low interest TFSA contribution used up $52K of $60K to leave you with $8K. The second contribution means you over-contributed by $52K - $8K = $44K. When the withdrawal amount is added back the following year, it will fix itself ... unless you keep making more contributions than the room you have.


The way to move the funds in the same year with no use of TFSA contribution room is a transfer, with special paperwork identifying that it is not a withdrawal. 'Course many use the Dec withdrawal and Jan contribution method as most FIs charge a fee for the transfer while withdrawals are free.


Cheers


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## ian (Jun 18, 2016)

The way to move the funds in the same year with no use of TFSA contribution room is a transfer, with special paperwork identifying that it is not a withdrawal. 'Course many use the Dec withdrawal and Jan contribution method as most FIs charge a fee for the transfer while withdrawals are free.

........................we did this when we dumped our CIBC TFSA and moved to another institution. 

Withdrew the money in mid December, contributed it in another financial institution in Jan. Avoided $300. ($150 each) in bank service fees.


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## cliffsecord (Jan 10, 2020)

When I moved from a HISA TFSA to a MF TFSA within Tangerine it popped up a warning about this situation and made me acknowledge that I understood it. Even though I understood all the rules, the pop up made me pause and call in to make sure that it was indeed a transfer.

So as someone suggested a good institution would have some kind of simple safe guard like at Tangerine. If anything to indemnify themselves from these kinds of mistakes.

Anyway. Good luck OP.

Now just make sure you understand how to calculate and keep track of your RRSP contributions .


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