You should know, if you have funds available that are earning an income for you, that you can minimize the income tax on that income, if your funds are put into a TFSA (Tax Free Savings Account).
Of course you can’t be a day trader with your funds in a TFSA account, as CRA will soon advise that your income is considered a business income, and will tax you accordingly.
As well, you should know, and should take heed, that putting into your TFSA account, more than an allowed amount, based on CRA’s annual amount allowed, will result in severe penalties. The penalty amount is 1% per month on the amount that has been overcontributed. This penalty will remain until either the contribution allowance increases (an annual amount advised by CRA), or until the overcontributed amount is withdrawn.
I’ve recently read an article on TFSA written by Jamie Golombek, with the comment “CRA refused to cancel overcontribution tax”.
I was surprised by that headline comment, so read further. A link to the article will follow, which I hope you will find useful, and remains as a valid link for your consideration.
It appears that the overcontributed amount was truly large, being in excess of $142,000 in 2022, and another $162,000 the following year. At 1% per month, the math isn’t that difficult, however the circumstances leading up to the taxpayer requesting relief, was very unfortunate. Correspondence from CRA was not received because the taxpayer moved without advising a change of address to CRA, and the the market value of the investments, in the TFSA account dropped significantly, resulting in not enough funds remaining to extract the overcontribution.
This is the Article copied from the National Post ePaper : Over Contribution to TFSA
I am so bold to quote : Read, mark, learn, and inwardly digest!
Jack
Hollingsworth & Associates 