# TFSA Audit - Overcontribution?



## HowIsMyFinancial (May 18, 2011)

Hi - I am helping a friend doing his TFSA and auditing his numbers ... he's generally dont pay too much attention to the financial side of things, so he's not too clear on the confusing TFSA rules.

In the audit I found he over-contributed in 2011 (because he does whole bunch of withdrawals / deposits, it confuses him) - common mistake when people dont realize when you do withdrawals the room don't come back to you until the following year.

The CRA didn't send any notification to him, the over-contribution for the year was around $1,500 and that was done in the month of November, so 1% penalty for every month - that comes to about $30 penalty? Because the room is regained when 2012 started.

Let me make sure I get my math straight:
2009: 0 deposit

2010: $8,000 deposit 

2011: $8,300 deposit, $4,100 withdrawals (the last contribution to the amount of $1,500 that caused the over-contribution happened in Nov)

2012: $7,600 deposit, $500 withdrawals (so by the end of 2012, we are all good now)

What should be our next steps? Should we proactively report this to TFSA? It's been a year since the over-contribution happens, how much penalty would be? I assume there would be interest on the unpaid penalty?

Thanks


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## jamesbe (May 8, 2010)

When did he withdraw the $4100 or was this over time?

$8000 + 8300 - 4100 == 12200 so that's okay.

If CRA didn't notice for 2011 I think you are good, when I was assessed it was pretty quick (during tax season) that they noticed.


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## HowIsMyFinancial (May 18, 2011)

jamesbe said:


> When did he withdraw the $4100 or was this over time?
> 
> $8000 + 8300 - 4100 == 12200 so that's okay.
> 
> If CRA didn't notice for 2011 I think you are good, when I was assessed it was pretty quick (during tax season) that they noticed.


That was the problem

in 2011, we have $15,000 contribution room (3x $5,000), my friend put $16,300 in deposit, so that's definitely more than the available room (regardless of withdrawals)


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## MrMatt (Dec 21, 2011)

HowIsMyFinancial said:


> That was the problem
> 
> in 2011, we have $15,000 contribution room (3x $5,000), my friend put $16,300 in deposit, so that's definitely more than the available room (regardless of withdrawals)


Yes, but if in November he took out the extra, the penalty would only apply for that one month.
http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/tfsa-celi/txtn/txtn-eng.html

See example #1
http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/tfsa-celi/txtn/xcssxmpl-eng.html#xmpl3


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## Four Pillars (Apr 5, 2009)

To answer your questions. Don't do anything.

I can assure you the CRA didn't miss anything - either they haven't notified him yet or he didn't get the notification or maybe they instituted a minimum threshold or maybe there is no penalty (I haven't verified your scenario).

The amount is very small, so I wouldn't even bother trying to figure it out. If he gets a notice, he can pay it. That's it.

Here's an article I wrote on appealing the penalty, but in this case it's clearly not worth it.

http://www.moneysmartsblog.com/tfsa-...n-penalty-fix/

Spend your time educating your friend on how TFSAs work instead.


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## HowIsMyFinancial (May 18, 2011)

Four Pillars said:


> To answer your questions. Don't do anything.
> 
> I can assure you the CRA didn't miss anything - either they haven't notified him yet or he didn't get the notification or maybe they instituted a minimum threshold or maybe there is no penalty (I haven't verified your scenario).
> 
> ...


Thanks for the advice!

I already tried to explain TFSA to him, it's confusing to some people.


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