Finally, the government has come to its senses about the 70,000 letters sent to Canadians who made over-contributions to tax-free savings accounts or transferred them without the proper paperwork.
In a statement issued this afternoon, the two ministers responsible for the new tax shelter said they recognized the confusion that resulted from lack of understanding of the rules. And they’re trying to make amends.
If you received a request to pay tax on your TFSA, you can wait until Aug. 3 to submit further information (not June 30, the original deadline). Moreover, you won’t have to pay tax if it’s clear there was a genuine misunderstanding.
The Government of Canada confirms that for the 2009 filing year, the first year of the program, we have taken the decision to be as flexible as possible in cases where a genuine misunderstanding of the TFSA contribution rules occurred.
Our intention is to review each situation on a case-by-case basis and, where appropriate, waive taxes on excess contributions for this year.
For instance, individuals who used their TFSA as a regular banking account in 2009, making deposits and withdrawals on a frequent basis, or who have transferred funds between TFSAs at different institutions, but whose net contributions never exceeded the 2009 limit of $5000, may not be required to pay the tax on excess contributions for this year.
The press release doesn’t mention that some financial institutions gave misinformation to customers. They, too, have learned something from this mess — as shown by their willingness to help customers clean up afterward.
Check out one such case involving ING Direct and a client, FS, below.