Government of Canada Extends Deadline For Canadians Who Received TFSA Return Packages

Last month the Canada Revenue Agency (CRA) sent letters to about 70,000 Canadians who may have over contributed to their Tax-Free Savings Account (TFSA). In many cases, there seems to have been a genuine confusion, amongst Canadians, regarding the contribution rules for the TFSA. As the program is new in Canada, our Government recognizes that it will take some time for Canadians to understand how it works and for some financial institutions to properly inform their clients about the rules. As a result, The Government of Canada has decided to be as flexible as possible, for the 2009 filing year, in cases where a genuine misunderstanding of the TFSA contribution rules occurred. It is the government’s intention to review each situation on a case-by-case basis and, where appropriate, waive taxes related to excess contributions for the 2009 year.

If you received a TFSA return letter, you are encouraged to respond by providing additional information or explanations with respect to your over-contributions. If you do not respond to the letter or you do not provide the additional information that is being requested, the CRA will issue a notice of assessment.  While the CRA requested additional information to be provided by June 30, 2010, the Government of Canada has decided to extend this deadline to August 3, 2010, to allow ample time for Canadians to complete the process.

Approximately 4.7 million Canadians have opened a Tax Free Savings Account since the federal government introduced the savings vehicle in 2009. The TFSA remains a flexible, registered, general purpose account that allows Canadians to maximize their savings by earning tax-free investment income. Contributions to a TFSA are not tax-deductible, but investment income earned in a TFSA, as well as TFSA withdrawals, are tax free. For more information on the TFSA and the rules regarding contribution limits and the payment of taxes, please visit www.cra-arc.gc.ca. or call the CRA at 1-800-959-8281.