First, thanks all, for this great discussion. Its very helpful.
This whole thing of adding withdrawals to next yr makes this very inflexible. Why can't the govt allow people to withdraw and put it back the same yr as long as they don't cross the 5 K / yr limit?
Because of ignorance, I moved my TFSA funds from one bank a/c to another bank a/c last yr. Looks like I will be getting penalty.
Also, how will we know about the penalty? Will we get a bill from CRA?
I agree with you completely Vaas.
I THINK the system will work like RSP's. You will get receipts from the two banks and a tax form to complete. You'll end up with 10+ K "new" contributions for the year and a penalty will be assessed from the month of your second contribution to Dec 31. (or the month you went over 5K). This will be deducted from your tax refund or you'll be billed (with interest!) if you owe taxes.
It's best to withdraw TFSA just before Dec 31 then transfer funds (the withdrawn amount plus 5K) into the new TFSA after Jan 1.
Guess why the banks will be offering their high interest for a very limited time? You'll be their pawn for the rest of the year!
I'm guessing the gov't makes people wait until the following year to re-contribute because otherwise people could have hundreds or even thousands of transactions that their banks would have to report to CRA which would bring the whole system to a screeching halt. Remember this is a registered account so Big Brother is keeping an eye on each and every transaction you make. Thing is though, I logged into my CRA Account today and while there is a new item for TFSA contributions and withdrawals, CRA doesn't seem to have a record of the 5K I contributed last year through my ING Direct account. Guess I get 5K more in contribution room????????? Well, we can all dream, can't we? 😉