{"id":21459,"date":"2014-08-11T20:20:03","date_gmt":"2014-08-11T12:20:03","guid":{"rendered":"https:\/\/canadianinquirer.net\/v1\/?p=21459"},"modified":"2014-08-11T20:57:40","modified_gmt":"2014-08-11T12:57:40","slug":"thousands-of-taxpayers-continue-to-run-afoul-of-tfsa-withdrawal-rule","status":"publish","type":"post","link":"https:\/\/canadianinquirer.net\/v1\/2014\/08\/11\/thousands-of-taxpayers-continue-to-run-afoul-of-tfsa-withdrawal-rule\/","title":{"rendered":"Thousands of taxpayers continue to run afoul of TFSA withdrawal rule"},"content":{"rendered":"

\"TFSA<\/a><\/p>\n

OTTAWA — A tricky rule keeps tripping up thousands of Canadians who make withdrawals from their tax-free savings accounts, and replace the money too early.<\/p>\n

Some 54,700 taxpayers got warning packages from the Canada Revenue Agency earlier this year about the problem affecting the 2013 taxation year, and were told they face a penalty.<\/p>\n

The number has been dropping steadily from a peak of 103,000 in 2010, but still represents a persistent misunderstanding of TFSA rules even as the agency and financial institutions step up education measures.<\/p>\n

The regulations say that account holders can put back the amounts they withdraw from a TFSA only in a later calendar year. Doing so in the same calendar year exposes them to a tax hit for overcontributions, even though they’re only replacing the withdrawn funds.<\/p>\n

By the end of 2013, some 10.7 million Canadians had opened a TFSA, a savings vehicle introduced by the Conservative government in 2009 that allows money to grow inside tax-free with no income-tax hit on withdrawal.<\/p>\n

The popular savings tool cost the federal treasury some $410 million in forgone taxes in 2013, or more than a billion dollars over its first five years.<\/p>\n

Some taxpayers are apparently slow to absorb the finicky withdrawal rule: this year 11,260 of them got the same warning package from the Canada Revenue Agency last year as well, figures provided by CRA show.<\/p>\n

As of the end of last month, the agency had waived penalties for more than 17,000 Canadians who broke the rule in 2012. The average penalty waived was $516, or a total of almost $9 million.<\/p>\n

And for the 2013 taxation year, more than 20,000 Canadians have already paid their penalties.<\/p>\n

Taxpayers who received a TFSA warning package in the mail this summer were given 60 days to respond. Those who don’t respond get a notice of assessment, imposing a penalty.<\/p>\n

A spokesman for the agency said the onus is on Canada’s banks and other financial institutions to make sure their customers know the rules.<\/p>\n

“As with any financial or investment product, financial institutions have a responsibility to inform their clients of the details and restrictions relating to TFSAs,” said Philippe Brideau.<\/p>\n

“The CRA continues to work very closely with the financial institutions to ensure that CRA information related to TFSA is well understood and known by the Canadian financial sector.”<\/p>\n

Brideau noted that fewer than half a per cent of TFSA holders ran afoul of the rules in 2013.<\/p>\n

The current maximum annual contribution to a tax-free savings account is $5,500, though Prime Minister Stephen Harper has promised to double the maximum once the federal books are balanced, expected next year in advance of the scheduled 2015 federal election.<\/p>\n

A special analysis in 2012 by the Finance Department found that the savings vehicle is more popular among higher income and older Canadians.<\/p>\n","protected":false},"excerpt":{"rendered":"

OTTAWA — A tricky rule keeps tripping up thousands of Canadians who make withdrawals from their tax-free savings accounts, and …<\/p>\n","protected":false},"author":44,"featured_media":21461,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1482,19,18],"tags":[7285,7284],"class_list":["post-21459","post","type-post","status-publish","format-standard","has-post-thumbnail","category-breaking","category-business","category-news-ca","tag-tax-free-savings-account","tag-tfsa","mauthors-dean-beeby","mauthors-the-canadian-press"],"_links":{"self":[{"href":"https:\/\/canadianinquirer.net\/v1\/wp-json\/wp\/v2\/posts\/21459","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/canadianinquirer.net\/v1\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/canadianinquirer.net\/v1\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/canadianinquirer.net\/v1\/wp-json\/wp\/v2\/users\/44"}],"replies":[{"embeddable":true,"href":"https:\/\/canadianinquirer.net\/v1\/wp-json\/wp\/v2\/comments?post=21459"}],"version-history":[{"count":0,"href":"https:\/\/canadianinquirer.net\/v1\/wp-json\/wp\/v2\/posts\/21459\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/canadianinquirer.net\/v1\/wp-json\/wp\/v2\/media\/21461"}],"wp:attachment":[{"href":"https:\/\/canadianinquirer.net\/v1\/wp-json\/wp\/v2\/media?parent=21459"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/canadianinquirer.net\/v1\/wp-json\/wp\/v2\/categories?post=21459"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/canadianinquirer.net\/v1\/wp-json\/wp\/v2\/tags?post=21459"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}