ARE YOU IN THE TAX MAN'S BAD BOOKS?

Sep 01, 2012

By Bob Komsic

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Tens of thousands are in hot water with the Canada Revenue Agency for overcontributing to their tax-free savings accounts in 2011.

The agency sent 76,000 mailouts this year to taxpayers who apparently fell afoul of the rules, demanding they pay extra income tax.

The number of mailouts is down from 103,000 sent out last summer, but higher than the 72,000 sent in 2010, suggesting the overcontribution problem is chronic.

A spokesman for the agency notes that the number of problem filers is a small fraction of the 8.2 million Canadians who have opened tax-free savings accounts or TFSAs.

The taxman can waive the extra taxes if an account-holder demonstrates there was a ”genuine” misunderstanding of the rule.

The rule says that any money taken out of a TFSA cannot be replaced until the following calendar year, or the deposit will be regarded as an overcontribution and therefore attract taxes.

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