In Budget 2011, the Government proposed a clamp down on certain swap transactions between RRSPs and other accounts: Benefits derived from asset purchase and sale transactions (“swap transactions”) between RRSPs and other accounts controlled by the RRSP annuitant. A swap transaction is a transfer of property (other than a transfer that is a contribution or [...]
It is undeniable that Tax-Free Savings Accounts (TFSAs) have unique advantages but I’m somewhat surprised by some recent reports that suggest that a lot of Canadians would be better off contributing to a TFSA instead of a RRSP. These arguments forget to take into account the unique advantages offered by RRSPs. Defer income taxes RRSPs [...]
A few commenters were interested in knowing more about the TFSA December Shuffle that I alluded to in my previous post. This simple strategy allows you to move your Tax-Free Savings Account from one institution to another while avoiding some or all transfer fees. It takes advantage of a property unique to the TFSA: any [...]
The Government of Canada has decided to be “as flexible as possible” in cases where a genuine misunderstanding of TFSA contribution rules resulted in TFSA excess amount penalties. If you are one of the 70,000 or Canadians who have received a letter from the Canada Revenue Agency asking for further information about your TFSA account, [...]
This post was originally published on June 15, 2010. I’m republishing it with updates on how and where to apply for waiver of TFSA over-contribution penalties. Update on June 27, 2010: The Government has decided to provide relief to taxpayers whose net TFSA contributions never exceeded $5,000 in 2009. The deadline for responding to the [...]
The Tax-Free Savings Account (TFSA) was introduced as a vehicle that would shelter investments from tax. Many tax payers are finding that instead of saving tax on investment returns, the TFSA is costing them money. These tax payers are now being charged penalties for the 2009 tax year to the tune of 1% per month [...]
You may want to check out a recent C. D. Howe Institute report titled Saver’s Choice: Comparing the Marginal Effective Tax Burdens on RRSPs. The report concluded that TFSAs are a more tax-efficient retirement savings vehicle than RRSPs for many Canadians because the effective rate of tax payable on retirement income is often higher than [...]
The Department of Finance is cracking down on what it calls “the use of inappropriate transactions to draw excessive benefits” from Tax-Free Savings Accounts. The amendment targets deliberate overcontributions to TFSAs, holding non-qualified investments in TFSAs and swap transactions between TFSAs and other accounts. Penalizing the first two strategies makes sense but it is not [...]
I’m not exactly early to the party but I’m now researching my Tax-Free Savings Account (TFSA) options and looking to shelter part of our emergency funds in a TFSA. Since the funds must be readily accessible, the TFSA would either be a high interest savings account or hold cashable GICs, which rules out self-directed or [...]
In an interview with Jon Chevreau of the Financial Post, actuary Malcolm Hamilton proposed adding retroactive contribution room to a TFSA to help more Canadians save for retirement. Here’s how the proposal would work: $5,000 of contribution room would be added for every year since age 18 to the 2010 TFSA contribution room. For instance, [...]
