I’ll relate my experience to underscore the significance of paying attention to your finances – not just the saving and investing parts but also the all-important records of those money transfers/contributions.
I contributed to my TFSA account for 2009 in May of that year and rested in content that I had been prudent in taking advantage of the newly introduced savings vehicle. Since financial institutions do not issue an official contribution receipt for TFSAs like they do for RRSPs, I viewed my monthly statement, verified that the contribution was listed and let it be.
Fast forward to Feb 2010: I filed my income tax return and the tax software (forms) did not have any line about TFSAs. I figured that financial institutions would report to the Canada Revenue Agency (CRA) directly and I had no further part to play. Read More…
Yes you will. I recommend reading the very easy to follow resource at the Canada Revenue Agency’s site: http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/tfsa-celi/menu-eng.html
So from what i understand you can make deposits/withdrawals at any time but there is a set limit of $5000 each year. But if your combined deposits equates to $5000 then anything beyond that will get taxed on any interest it earns. So if my balance is below $5000 but my accumulated deposits over the year is $7000 then will i get hit in charges for the $2000?
Paying attention to financial statements applies to anything in life not just tax-free bank accounts. One would be best served to read anything and everything when it involves investing your own hard-earned money. Sadly, most don’t.
I was hit hard with penalties for constantly withdrawing and depositing. What was annoying was that my bank (RBC) didn’t let me know the restrictions and possible penalties until i found out by accident from friends. Damn bank just wanted to make more money off me.
I actually didnt start contributing until February of this year. My contribution limit is $10,000 since i did not use it in 2009 so it carries over to 2010 for an additional $5000.
Good read
Thank goodness the revenue agency had issued a statement that those who contributed in the 2009 period would not see tax penalties due to misinformation that was out there.
TFSA accounts can be a tricky thing if you dont read the fine print.