Posted: 01 Jun 2010 04:30 AM PDT
This is a column by regular contributor ClarkI’ll relate my experience to underscore the significance of paying attention to your finances – not just the saving and investing parts but also the all-important records of those money transfers/contributions.
I contributed to my TFSA account for 2009 in May of that year and rested in content that I had been prudent in taking advantage of the newly introduced savings vehicle. Since financial institutions do not issue an official contribution receipt for TFSAs like they do for RRSPs, I viewed my monthly statement, verified that the contribution was listed and let it be.
Fast forward to Feb 2010: I filed my income tax return and the tax software (forms) did not have any line about TFSAs. I figured that financial institutions would report to the Canada Revenue Agency (CRA) directly and I had no further part to play. After receiving my Notice of Assessment (NoA) from the CRA, I found that the summary section listed that I had a TFSA contribution room of $10,000 for the year 2010 (the extra $5000 was carried over from the unused room for 2009!). The NoA mentioned that I need to contact my financial institution if there are any errors in the contribution room given on the summary. Despite seeing this, I waited for another couple of weeks thinking that financial institutions may have until April (the tax filing deadline) to report 2009 TFSA contributions. Call it laziness or naivety (or anything else that you find appropriate) but that is what I did!
Sometime in early April, a light bulb went off in my head and I realized that I have to take responsibility for my money. When I contacted my financial institution, they were surprised and said that all contributions had been reported – there went my generosity of giving financial institutions time until April to report TFSA contributions! They asked for a copy of my NoA as proof and promised to do the needful. I learned that my report had been rejected by the CRA the first time around due to some error in the data elements. A few weeks after my intervention, I checked the TFSA section of My Account on the CRA website to see that the contribution had been accepted and showed up correctly.
It is entirely possible that my case was an unusual one and someone from the financial institution may have noticed my rejected report in a few months and corrected the situation. As long as I did not contribute over $5000 for 2010, I would not have been penalized. Nonetheless, I’ll share a few lessons I learned from this experience – some new, some refreshers.
About the Author: Clark is a twenty-something Saskatchewan resident employed in the manufacturing sector. He repaid around $20,000 in student loans and has been working to build his investment portfolio as a DIY investor (not trader) while nurturing plans to retire early. He loves reading (and using the lessons learned) about personal finance, technology and minimalism
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