get hit with an overcontribution penalty tax
In this recent case, the taxpayer began contributing to his TFSA in 2014. He overcontributed in 2015 and, as a result, the CRA in May 2016 sent him an “education letter” notifying him of his overcontribution, and telling him to withdraw the excess contribution “immediately” to avoid the penalty tax.Article content
The taxpayer subsequently requested to have the tax and penalties cancelled. The taxpayer explained he had consulted his profile on the CRA’s website, which identified his TFSA contribution room as “.” The taxpayer explained he interpreted this information to mean he had $18,459.99 in available TFSA contribution room, “not realizing that the brackets around that figure indicated that he actually had a negative contribution limit, as a result of previous overcontribution.
The taxpayer also said that when he called the CRA to resolve the issue, the CRA agent admitted that nowhere in the TFSA contribution room section does it state that a value in brackets means a negative number. He also said he couldn’t recall his 2015 TFSA overcontribution, saying “it must have been a mistake, because he is an honest taxpayer.”
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