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TFSA Contribution mistake
July 30, 2018
10:16 am
parwin.jagdev
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Hi,

This year, I mistakenly withdraw $10,000 from TFSA to the savings account and deposit $20,000 same day after realizing that I can contribute more as per my contribution room. This happened in March 2018.

Please see below image as my contribution in the previous tax year. Now, I have total $46,800 including interests in my TFSA. Can you please advise if I should withdraw money from TFSA now? Or explain to CRA that it was a mistake as I transferred money back to TFSA on the same day!!

Thank you.

CRA_Calculation-of-contribution-roomAsOf2018.png

July 30, 2018
1:10 pm
Rick
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Hi there! Welcome to the forum.
Not sure I am seeing your problem.
On Jan 1 2018 you had 31507.00 in contribution room for 2018
In March you took out 10K, which will be added to your contribution room again in Jan 2019 so your contribution room for 2018 stays at 31.5K
Then you contributed 20K on the same day in March, which does affect your 2018 contribution room, so it would now be reduced to 11.5K for the year.
Looks to me like you can still add another 11.5K and still be within your contribution limits.
Come Jan 2019, your 10K that you took out will be added to whatever next years contribution limit will be.
Maximum contribution room from 2009 is 57,500, so if you were eligible in 2009, you are still OK.

July 30, 2018
4:09 pm
Kidd
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Hi, welcome to this forum.

July 30, 2018
4:59 pm
Loonie
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I agree with Rick's analysis. No need to panic.
I suppose you could call CRA for confirmation but , if you do, my rule of thumb is that you must call them at least twice and ask the same questions in order to ensure the answer is correct. Personally, I'd trust Rick!

I suggest that, for future reference, you make a chart to include all your transactions and running contribution limits so that you can keep close track.

July 30, 2018
5:20 pm
Kidd
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Removed by me

July 30, 2018
6:44 pm
Bill
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No need to call CRA, Rick's got it right, you're fine here.

Very simple, your contribution room at start of year was over $31.5K, you've only put in $20K so far this year.

Explaining to CRA something's a mistake gets you nowhere, it's not relevant whether you did it by mistake or on purpose.

July 30, 2018
11:16 pm
Loonie
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Kidd said
If the cra deem it to be an over contribution, you will be taxed.

If i take out 10k
And then deposit 20k
Those two transactions taking place in one year, count as 30k. if i understand the tfsa rules correctly.
If i do not have 30k deposit room, i will be taxed on the deposit above my space available.  

Taking out 10K does not reduce your CONTRIBUTION limit. It just means that you can't INCREASE your 2018 contribution limit because of it. You have to wait to 2019 to add that to your contribution room, but you still had all the contribution room that you had in January.
I think it's confusing because we tend to think of the amounts as being the exact same pile of dollars, taking from one place and moving to another etc. But CRA sees it strictly in terms of limits and doesn't care where it came from.

Bill has put the matter succinctly.

July 30, 2018
11:20 pm
Rick
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Loonie nailed it.

July 31, 2018
1:03 am
Kidd
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July 31, 2018
1:32 am
Kidd
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July 31, 2018
1:50 am
Loonie
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Let's not confuse the OP with numbers that are not relevant.

His contribution room was 31,507. He then contributed 20,000, leaving 11,507 still in contribution room (assuming he has not made any other contributions during 2018). The withdrawal is irrelevant since it did not exceed the contribution room. End of story.

July 31, 2018
4:49 am
Bill
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Kidd, you are ignoring the TFSA rules in favour of your own take on things.

Contribution limit on Jan 1 indicates max you can put in that year. End of story.

July 31, 2018
5:28 am
Norman1
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Kidd said
Hopefully the above story remains, because it stresses a point. That being... We have all (including me) said the same thing. I just came at the problem from the other way. The 10k taken out of the tfsa account is not realized on the cra's books, even though it appears on paper. So to make a 20k deposit, you need 30k room.
… 

In both cases, the approach was incorrect.

One never needs $30K of room to make a $20K TFSA contribution. That's like saying one needs to have $20 in one's pocket to have $10 in the same pocket.

Mixing TFSA contribution room with TFSA account balance will give strange results such as that. TFSA withdrawals reduce TFSA account balance but never decrease TFSA contribution room.


$12 for the room, plus the $2 tip equals $14. They originally paid $15. What happened to that other dollar?  

It isn't $12 for the room. It is actually $12 for the room and tip, of which $2 is the tip.

$12 for room & tip plus 3 x $1 = $3 they got back gives the original $15.

July 31, 2018
9:42 am
Rick
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Kidd said
So to make a 20k deposit, you need 30k room.

That makes no sense. Might I suggest you check out the link you provided in post #3? Second sentence. in all bold lettering:
"Withdrawing funds from your TFSA does not reduce the total amount of contributions you have already made for the year."
CRA cares about two things when it comes to basic TFSA's .. balance on Dec 31 and contributions from Jan 1st to Dec 31. Withdrawing from your TFSA has absolutely no effect on how much you are allowed to contribute in the current calendar year. It will increase your contribution room for the following year by the amount you take out. That's it. If OP had depleted his entire TFSA balance to 0, he would STILL be able to contribute the 31.5K of contribution room for 2018. The way you approach it is like taking a plane from Vancouver to Halifax to drive to Edmonton. You still get to Edmonton, but why go to all the trouble? K.I.S.S.

July 31, 2018
10:35 am
Bill
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Rick, in the same post Kidd stated a motel room cost $10 and also that it cost $12. I can see how confusion ensues. sf-wink

July 31, 2018
1:09 pm
Kidd
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July 31, 2018
2:00 pm
Bill
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Kidd, the first post indicated CRA said his contribution room for 2018 was $31,507. But you're disregarding that and coming up with your own calculations. Ok.

July 31, 2018
3:10 pm
Loonie
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The maximum contribution has nothing to do with it. So, all conclusions based on this are irrelevant.
Current contribution room is not simply the sum of maximum annual contributions allowed (57,500). It is based on the annual contribution room allowed by government (referred to as "dollar limit" in OP's chart), how much you have withdrawn in previous years (not current year), and how much you have recontributed, including any profits you have made in the TFSA. The chart in OP's message makes this clear. There is no reference to 57,500 because it is irrelevant for this calculation.

I think that Rick, Bill and I have made our point clearly. I am only continuing to respond because I am concerned that OP is getting so many misleading posts, and this is his first inquiry here.

July 31, 2018
4:25 pm
Rick
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This is nutz. See post #6.
"Mike drop"

July 31, 2018
7:14 pm
Norman1
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This is both the TFSA account balance and TFSA contribution room side-by-side:

TFSA Account
Balance
TFSA Contribution
Room
Start of 2018 $36,800 $31,507.39
$10,000 withdrawal -$10,000 no impact in 2018
$20,000 contribution +$20,000 -$20,000.00
Year-to-date balances $46,800 sf-smile $11,507.39

Still over $11,000 of unused TFSA contribution room. So, no TFSA overcontribution occurred. sf-cool

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