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TFSA Interest crossed over TFSA limit.
January 10, 2016
8:32 am
insi@nia
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Hey guys, one question has jumped into my attention. That is the TFSA interest exceeded the TFSA limit. Sound like rookie silly question, but please share your answer.

For Example,
TFSA limit is 100,000 and Ive contributed 100,000. The TFSA interest is rate 2%. then, the interest is going to contribute TFSA account roughly $167 monthly.

TFSA account is growing up as 100,167 (1st Mon), 100,333(2nd Mon) and 100500(3rd Mon). However, the interest makes TFSA limit crossed the TFSA Max.

Then, the extra exceeded the limit would be taxable or fine?

Thank you for your time in Advance. sf-smile

January 10, 2016
9:14 am
kanaka
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insi@nia said

Hey guys, one question has jumped into my attention. That is the TFSA interest exceeded the TFSA limit. Sound like rookie silly question, but please share your answer.

For Example,
TFSA limit is 100,000 and Ive contributed 100,000. The TFSA interest is rate 2%. then, the interest is going to contribute TFSA account roughly $167 monthly.

TFSA account is growing up as 100,167 (1st Mon), 100,333(2nd Mon) and 100500(3rd Mon). However, the interest makes TFSA limit crossed the TFSA Max.

Then, the extra exceeded the limit would be taxable or fine?

Thank you for your time in Advance. sf-smile

The limit is what is controlled NOT how much interest or gain made once invested.

January 10, 2016
10:30 am
Norman1
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I agree with kanaka.

The TFSA limit is the limit on the contributions to a TFSA, whether cash or in-kind.

Interest, capital gains, dividends, and distributions earned by what is inside a TFSA are not considered to be TFSA contributions.

January 10, 2016
10:53 am
Bill
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ins@nia, as kanaka said, there are no TFSA balance limits.

The only limits involve limits on new money (contributions) put in, i.e. by 2016, the max total new contributions can't exceed $46,500. Every year after 2016 this limit is slated to go up by at least $5500.

In addition, you can put back, recontribute, into your TFSAs any withdrawals from prior years that you've not previously already recontributed.

No other limits, so if you can make a million bucks inside your TFSAs go for it and be prepared for a lot of jealousy from anyone who knows you.

January 10, 2016
11:54 am
insi@nia
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Thanks all guys for answering.
sf-wink

January 10, 2016
12:02 pm
Winnie
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Any interest earned inside a TFSA is not considered to be TFSA contributions and that interest will be added to your TFSA limit.
Example.
TFSA limit including 2016 contribution is $46,500 right now.
If you, for example, earned from 2009 until now interest exactly $5,000 and have total of $51,500 in your TFSA right now, you can do whole $51,500 withdrawal in 2016 and you will be able to re-deposit that whole $51,500 in 2017 plus additional $5,500 for 2017 or whatever amount Ottawa will decide at that time.

January 10, 2016
4:41 pm
Bill
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Winnie, it's not just interest that can affect how to calculate the limit as you do. It applies to any increase in the TFSA. For example, if you buy BCE stock worth $5000 in your TFSA and then later you sell it for $6000 prior to withdrawing the funds then you can recontribute the $6000, i.e. including the $1000 capital gain, in a following year.

Note also that it can go both ways, it also applies to any decreases, such as realized capital losses. For example, if you buy $5000 of Potash Corp stock in your TFSA and you withdraw the funds after selling the stock for $3500 then you can only recontribute $3500 in a subsequent year. The way you calculate the limit would see a reduction of $1500 in that case.

January 10, 2016
5:00 pm
Loonie
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If, as you say, you've contributed 100,000, then you've overcontributed and will be subject to penalties from CRA. The only way you can get away with having such a large amount in your TFSA is if either you made the proper contributions, doubled your money, then withdrew it last year or earlier, and recontributed it in a subsequent year; or if you inherited an additional TFSA by survivorship.
As Wiinnie pointed out, the current contribution limit is less than 50,000.

I think it will help you if you make a clear distinction in your mind between contributions limits and actual amount in account.

To help with this, I suggest you maintain a chart showing your contributions, as follows:
year
contribution limit for that year
amount, date and financial institution of deposits
amount date and finaancial institution of withdrawals
This will help you keep track and avoid problems.

January 10, 2016
7:47 pm
Bill
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Chart of contributions, etc as Loonie suggests is a good idea but is only necessary for the previous and the current years as CRA MyAccount has that historical info re contributions, withdrawals and recontributions going back to 2009 for each of us. It's currently up-to-date to Dec 31/14 and our 2015 activity will be there in a few months, once the institutions report our 2015 ins and outs to CRA. So you don't have to keep records back to day one.

January 10, 2016
9:12 pm
kanaka
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Bill said

Chart of contributions, etc as Loonie suggests is a good idea but is only necessary for the previous and the current years as CRA MyAccount has that historical info re contributions, withdrawals and recontributions going back to 2009 for each of us. It's currently up-to-date to Dec 31/14 and our 2015 activity will be there in a few months, once the institutions report our 2015 ins and outs to CRA. So you don't have to keep records back to day one.

I think you should keep a paper record from day one with dates-years of contributions, withdrawals (plus interest), and recontributions of previous year(s) withdrawals (plus interest). MyAccount records did not reflect contributions for over a year and I contacted my federal MP and waited for months for a CYA response. I contacted the financial institution many times and they pulled their records showing they were submitted. Finally they re-submitted and with in a month MyAccount reflected properly.

January 10, 2016
9:14 pm
Loonie
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Undoubtedly a good idea, Bill. I have never used MyCRA.

Personally, I would probably also want to keep my own personal records even if I did use MyCRA, as I maintain a certain level of distrust of digital records. I think that for many of us it will remain a good idea to have the entire up-to-date record, all in one place. So far, this can probably be accommodated on one piece of paper.
It's so easy to get confused especially if there are withdrawals and recontributions!sf-confused And, in this case, confusion can be very costly.

January 11, 2016
11:02 am
Bill
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Loonie, it's called My Account on the cra.gc.ca site, and it's the same as logging in to your account with a bank. You have to set up an id and password and then you're in to your own data. It shows all your filed tax returns, notices of assessments, and various related data like TFSA history, limits, etc. we're talking about here. You can always print off anything you want hardcopy for. I find it handy because I help some folks (who are rather lax with their record keeping) do their taxes and they can go in to their account and let me see what's been going on with the taxman.
kanaka, as I said, My Account doesn't show TFSA activity until the institutions file and they are not required to file until some time after year-end, so what you encountered may be normal. Banks, etc have some months still to report your 2015 TFSA activity to CRA (I'm not sure what their deadline is) so today you would only see activity up to December 31, 2014. You would have to augment My Account info with your own records for transactions from January 1, 2015 on. Sometime in 2016 CRA will update for the info they receive re 2015 activity.

January 11, 2016
5:37 pm
Norman1
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According to Chapter 4 of RC4477: Tax-Free Savings Account (TFSA) Guide for Issuers, TFSA issuers have to file TFSA info by the last day of February:

Due date

You have to file the TFSA annual information return by the last day of February following the calendar year to which the TFSA annual information return applies. If the last day of February is a Saturday or Sunday your TFSA annual information return is due the next business day.

If you discontinue your business or activity, you have to file a return for the year or part-year no later than 30 days after the date the business or activity ended.

January 12, 2016
10:17 am
Yatti420
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Don't Trust My Account!!

It's not accurate.. Mine is missing an entire year or two of reporting from a specific institution.. Just be careful.. Always track your own contributions etc!

January 12, 2016
10:23 am
kanaka
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Yatti420 said

Don't Trust My Account!!

It's not accurate.. Mine is missing an entire year or two of reporting from a specific institution.. Just be careful.. Always track your own contributions etc!

Was it Outlook Financial?

January 12, 2016
8:52 pm
Loonie
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Last year, for the first time, although there was no issue about it, our accountant asked US for our TFSA records, as a precaution. He has permission for access to CRA records.
Also, be aware that even you consistently have your TFSA with the same institution, the records there will not necessarily be available to you indefinitely. You need to save them periodically (and print them, in my opinion). This will be an issue especially for younger people who may have many years of contributions, withdrawals and recontributions ahead of them. I would be easy to lose track. Protect yourself against hackers too by printing.

January 13, 2016
5:26 am
Bill
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Every year I go in and print my updated TFSA history from My Account (Loonie, you probably know, you can sign in even though you've also given your accountant access rights - representatives sign in under their i.d.) and then I just write on that paper my current year's activity. That way I make sure the CRA's records are right, year by year. I once had an issue with accumulated carry-forward amounts re RRSPs that went back a long, long time and I've found it's good to make sure any errors with CRA's data is brought to their attention asap.

January 13, 2016
10:04 am
kanaka
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Bill said

Every year I go in and print my updated TFSA history from My Account (Loonie, you probably know, you can sign in even though you've also given your accountant access rights - representatives sign in under their i.d.) and then I just write on that paper my current year's activity. That way I make sure the CRA's records are right, year by year. I once had an issue with accumulated carry-forward amounts re RRSPs that went back a long, long time and I've found it's good to make sure any errors with CRA's data is brought to their attention asap.

I do same. There are about 3 pages you can print. Then I write any activity for the year...contribution amounts, withdrawals, date, and financial institution. I also print the 3 pages into PDF format for permanent digital storage on "my" computer.

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