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The given name of Tax Free Savings Account is a bit of a misleading title. It is a registered tax-advantaged savings account. Unlike, a regular investment account where you have to pay tax on the interest/dividends/capital gains you earn, a registered Tax-Free Savings Account (TFSA), is where any income you earn is non-taxable. Think of it as an investment holding account to store things like exchange-traded funds (ETFs), guaranteed investment certificates (GICs), bonds, stocks and, yes, plain-old cash.

While you do have to follow by the set amount of contribution room each year, any gains you earn on those investments will not affect your contribution room for the current year or years to come. Any resident of Canada, over the age of 18, with a valid social insurance number can open a TFSA.

How much can I contribute to my TFSA?

The TFSA contribution limit for 2022 is $6,000, if you turned 18 before the year 2009, your maximum lifetime TFSA contribution limit will be $81,500. If you take money out of your TFSA, you get that room back on January 1 the following year. Just don’t go over your limit.

Year Annual TFSA Contribution Limit
2009 $5,000
2010 $5,000
2011 $5,000
2012 $5,000
2013 $5,500
2014 $5,500
2015 $10,000
2016 $5,500
2017 $5,500
2018 $5,500
2019 $6,000
2020 $6,000
2021 $6,000
2022 $6,000
Total Contribution Room for 2009-2022:  $81,500

How to check your TFSA contribution room

Here are two ways that you can calculate your annual TFSA dollar limit.

  1. If you turned 18 in a year after 2009, check out the maximum annual contribution limits either above in our chart or on the CRA’s site.
    1.1. Then add together the maximum contributions from the year you turned 18 up to the present.
    1.2. If you made a withdrawal from your TFSA in the previous year, add that amount as well.
    1.3. Subtract the total of all prior years’ contributions from that number.
    1.4. And voila! This total is your current maximum contribution.
  2. Canada Revenue Agency (‘CRA’) tracks your contribution room. You can log on to the CRA’s site or via their app.
    2.1. Go to the CRA My Account login
    2.2. Login with your preferred method. Note: If you’ve set up your bank as a sign-in partner, this is the simplest way to access your CRA account.
    2.3. Under the tabbed header, navigate to “RRSP and TFSA”
    2.4. Click “Tax-Free Savings Account (TFSA)”
    2.5. Click “Contribution Room”
    2.6. Click “Next” at the disclaimer
    2.7. Look for ‘2021 TFSA contribution room on January 1, 2021’ or ‘2022 TFSA contribution room on January 1, 2022’ This value is your most accurate contribution room since the date. Any contributions or withdrawals for the current year will not be included in this amount.
  3. You can also get your maximum contribution by phoning CRA’s Tax Information Phone Service: 1-800-267-6999. Remember to be patient if you are on hold for a while! Also, keep in mind that this amount may not reflect any contributions you’ve made from January 1 onward.
Unused TFSA contribution room to date + total withdrawal made this year + next year’s TFSA’s contribution limit =TFSA contribution room at the beginning of next year.

Are you one of the individuals who has multiple TFSAs?

Remember that your combined contributions to all of them cannot exceed your available contribution room for the current year.

If you have deposited or withdrawn money from your TFSA, it can take time for the transactions to be reported. If you check in mid to late February, this will allow time for your financial institution to report all your transactions (deposits and withdrawals) from the previous year. Ideally, keep track of those transactions yourself to ensure you don’t over-contribute.

What happens if I can’t max out my contributions?

If you can’t contribute the maximum allowable in a given year, you can catch up in the future. Unused contribution amounts can be carried forward indefinitely and used in subsequent years.
In 2022, you have $6,000 to contribute to your TFSA in addition to any unused contribution room from previous years.

Withdrawals can be re-contributed

Tax Free Savings Accounts are very flexible. If you need money, you can withdraw funds any time and the amounts withdrawn in a given year are added back to your contribution room for the next year.

For example, you can make a withdrawal in December of 2022, then re-contribute that same amount in January 2023.

Over-contribution penalty

Did you know that there is a penalty if you accidentally contribute more than your allowable limit? In that case, a tax equal to 1% of the highest excess TFSA amount in the month will be applied for each month that you are in an excess contribution position.

For example, if you contribute $2000, you pay $20 (1%) per month until you remove the over-contribution amount.

Before you get your pitchfork out against CRA employees, you will receive a letter in the first instance of an over-contribution. This will allow you to withdraw the excess amount prior to receiving a penalty.

If this sounds overwhelming, don’t worry – Richardson Miller LLP is in your corner. Give us a call and we can help you get set up.

We’re happy to answer your questions, clear up any confusion and get you on the right path. Having clean, up-to-date books will make tax time so much easier for you!

Richardson Miller LLP is here to keep you on track and ensure that your taxes and accounting needs are met. Contact us today!

The events of 2020 and 2021 have caused a significant push for businesses to pursue the E-Commerce route. It’s tough to sell your product if your retail location is forced to close. It’s also tough to sell your handcrafted items if the markets are closed… or if you find your customers are just opting to stay home. The World Wide Web is a fantastic way to reach your customers in each of the 168 hours in a week. You now have customers across Canada… or perhaps the world. Congratulations! Perhaps it’s time to take a step back to make sure you’re not falling into some common E-Commerce mistakes.

1. Failing to calculate the true costs of your product.

You’ve got an awesome product to sell online. Do you know the TRUE cost of selling that item? What is the total cost to get your product into your customers’ hands? Calculating this true cost is a critical step in determining your business viability any sort of profitability analysis. Are these business efforts worth it? Or would it make more money taking that part-time minimum wage job?

Consider the following:

  • Foreign exchange rates and potential for fluctuation.
  • Shipping costs: Any import costs plus the cost to ship your product to your customers.
  • Sales fees: Does your sales platform take a cut of your sales? Credit Card/merchant fees?
  • What about your time? You’ve started a crafting venture. Have you considered the value of your time in making these products?

2. Failing to report income

The Canada Revenue Agency requires you to report your earnings from your e-commerce ventures. It may be tempting to omit these online earnings. Did you know that CRA is able to request payout reports from various online e-commerce platforms? That’s right. CRA is able to obtain your earnings reports. Don’t be fooled into thinking that CRA is only concerned with the “big fish” business owners out there. The fact is that the little guys are more likely to simply pay their tax assessments… so are perfectly content in pursuing small business as well. You’re far better off to report the earnings and related expenses from the start and don’t attract their attention.

3. Failing to register for GST/HST and PST

Put very simply, if you’ve got annual sales of goods and services in Canada of $30,000 or more, you should be registering for GST. This means you’ll need to charge sales taxes to your customers and remit them to the related government body.

Do you need to register for PST in the various provinces?

You’ve got customers in British Columbia? Saskatchewan? Manitoba? Quebec? Each province is different. Call me lazy (or considerate of your time), but I think the best advice I can offer here is to research each province based on your situation. Some provinces have fairly simple and straightforward guidelines… but others have very specific rules. Some PST publications read as though you have to register for PST… unless you happen to sell purple widgets to lefthanded people.

Check out the links to these publications:

As a final check of your understanding, go ahead and call the 1-800 numbers to the provinces. Talk to someone from the related sales tax department to gain more comfort to your responsibilities to their province.

Authors note: unlike the CRA helpline, the provincial bodies tend to provide great advice and service.

4. Failing to charge GST/HST and PST properly

Not charging sales taxes properly is an extremely common mistake in E-Commerce. It’s critical that your sales platform/website is set up correctly to navigate this. If you’ve got customers across Canada and the United States, do you fully understand who has to pay sales taxes and at what rate?

GST/HST- if you are registered for GST/HST, you must charge it based on the ship-to address.

  • Not registered for GST or PST? DO NOT CHARGE IT. This is considered fraudulent.
  • Customer in Ontario? Charge 13% HST
  • Customer in Alberta? Charge 5% GST
  • Customer in New Brunswick? Charge 15% HST
  • Customers in the United States? Do not charge GST/HST

A very common mistake for businesses in Alberta is to simply charge the 5% GST to everyone. It’s a painful realization when CRA reviews their invoices to see that they should have charged a customer 15% and suddenly their profits disappear by way of their GST/HST filing.

5. Failing to enlist a professional accountant tax filings

An experienced, qualified professional accountant can assist you with your various filings, tax and sales tax obligations.

  • What expenses can you reasonably deduct?
  • When should you be registering for sales taxes?
  • How do you file sales taxes?
  • When should you consider incorporating your business?

If you don’t yet have a trusted accountant, we’re happy to help!