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account and then “transferred” it to a new financial institution then
you completed a withdrawal and contribution – not a transfer.

It is possible however, that one or both of the financial
institutions you had the TFSA at, incorrectly reported the
transfer as a contribution or a withdrawal.

For example if you transferred your RBC TFSA to an ING TFSA, then if
there was an error made, RBC might have reported the transfer-out as a
withdrawal, and ING might have reported the transfer-in as a
contribution.

To fix this situation

1. Contact the financial institutions involved with your TFSA transfer
   and ask if the transfer was incorrectly reported as a contribution or
   withdrawal.
2. If the answer from #1 is yes – then ask the financial institution to
   fix the transaction so it is a transfer, and then ask them to file an
   amendment with the CRA.  Once this amendment is accepted by the CRA,
   then your over-contribution should disappear.
3. If the answer is no – then call the CRA and try to clarify with them
   how they are determining you are over-contributed.

Over-contribution penalty is still being charged after withdrawal of
excess amount

Michael James mentions yet another situation (see link at bottom of
page where a person had over-contributed to their TFSA, fixed the
problem by withdrawing the excess amount and yet was charged an
over-contribution penalty for the remainder of the year.  In fact the
penalty should have only been applied for the time period when they were
over the contribution amount.

The CRA is in charge of adding up all your TFSA transactions in your
various TFSA accounts and determining if you are staying within the
rules.  The CRA relies on the reporting from the financial institutions
to collect this data.

In this case, that person needs to contact their financial
institution to verify that all their withdrawals were reported
properly.  If for some reason, a person’s “removal of excess” withdrawal
(which in fact, is just a regular withdrawal) was not reported to the
CRA, then the CRA would think the person was continuing to be
over-contributed.

To fix this situation

1. Contact the financial institution(s) that hold your TFSA and verify
   all your transactions with them.  They need to be able to tell you if
   any transaction was reported as a withdrawal or a contribution.
2. If you determine that the financial institution made an error, ask
   the financial institution to fix the transaction, and then ask them to
   file an amendment with the CRA.  Once this amendment is accepted by the
   CRA, then your over-contribution should disappear.
3. If your financial institution appears to have reported your
   transactions correctly to the CRA, then call the CRA and try to clarify
   with them how they are determining you are over-contributed.

TFSA transfer to new financial institutions are
expensive.  To avoid transfer fees, please read TFSA
Institutional Transfer Strategies.

The cheapest TFSA is available at Questrade
Discount Brokerage.  No annual accounts fee and $5 trades.

Other articles about TFSA over-contribution penalties

TFSA
Over Contributions at the Canadian Tax Resource blog.

Taxpayers
hit with penalties at the Toronto Star – written by Ellen Roseman.

TFSA
Over-Contributions May Be Over-Penalized at Michael James on Money.

TFSA
Excess Contribution Penalties Ensare Taxpayers at the Canadian
Capitalist.

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