More than 70 thousand Canadians misunderstood the rules about a TFSA — Tax Free Savings Account — and are now being hit with penalties by Revenue Canada.
Letters have gone out in the last few weeks, outlining how contributors put too much money into the Tax Free account and now face a one per cent tax for every month they were over.
That’s potentially 12 per cent as a penalty.
Many people who opened an account were using it like a regular bank account.
After contributing 5 thousand dollars, many withdrew some or all of the cash and when they put money back in, Revenue Canada says they over-contributed… even though their total was under 5 thousand for the year.
Canadian Taxpayers Federation President Kevin Gaudet tells Bayshore Broadcasting News, it is a nightmare for the Federal Tories who have been touting the plan as a tax free savings vehicle.
He says they need to address the problem and he is meeting over the next few days with the Finance Minister to talk about the issue.
Gaudet says Steven Harper is poll driven, and this “David and Goliath” story of the little guy fighting “Big Bad Revenue Canada” is not good news for the minority government.
For example:
Putting $5,000 in a TFSA and then withdrawing it in the same month, and then putting $5,000 back in… leaves a total of $5,000 in the account… but the tax-man says you are over by $5,000. You then owe 1 per cent on $5,000 for every month it is in the account… potentially a $600 penalty.
