Page 85 - A Canuck's Guide to Financial Literacy 2020

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To determine your contribution room, You can visit MyCRA and log in through your online
banking or call the Tax Information Phone Service (TIPS) at 1-800-267-6999.

Non-Resident Contribution Room

It's important to note that if you're a non-resident of Canada throughout the entire year, you
would not be eligible to accumulate contribution room.

Over Contribution Penalty

If you over contribute above your TFSA limit during the year, you would be subject to a 1%
tax penalty on the excess amount for each month the excess amount remains inside the
TFSA.

The CRA may send you out a letter informing you of your over contribution. If you receive
such a letter, the proposed course of action should be to remove the excess amount as
soon as possible.

Example: Jeff has TFSA contribution room of $63,500. In March, Jeff over
contributed $5,000 into his TFSA for a total contribution of $68,500. In June, he noticed the
error when he received a letter from the CRA. His tax penalty is $150. (1% * 5,000 = $50 * 3
months = $150.)

Honest Mistake - If the over contribution amount arises due to an error, the CRA may
waive or cancel the taxes owed. However, each situation is unique and would require
review at the time.

Withdrawing from TFSA

Withdrawals from TFSAs are permitted at any time, pending on the type of investment held
inside the TFSA. For example, a if you're holding a 3-year GIC inside the TFSA, you would
have to wait until the GIC matures before withdrawing.

When you withdraw funds from a TFSA, you do not reduce the available contribution room,
until January 1st of the following year. Annual withdrawals can be added back the following
year.

Example: Jeff has contributed $50,000 into his TFSA. He decided he wanted to withdraw
$5,000 from his TFSA. Jeff's total contribution is still $50,000 even though he withdrew
$5,000. On January 1st of the following year, pending no other contributions, Jeff's total
contribution will be $45,000.