Over-contributing to a Tax-Free Savings Account (“TFSA”) can trigger unexpected taxes and penalties from the Canada Revenue Agency (“CRA”). This article explains what a TFSA over-contribution is, outlines its limits, and offers strategies for avoiding one.

What Is a TFSA Over-Contribution?

A TFSA over-contribution occurs when a taxpayer contributes more to a TFSA than their contribution room allows. Every Canadian aged 18 and over accumulates TFSA contribution room each year, and if a taxpayer deposits an amount beyond that limit (including carry-forward room from prior years), the surplus is considered an “excess TFSA amount” by the CRA and is subject to a special tax.

CRA TFSA Contribution Limits

A taxpayer should understand CRA TFSA contribution limits to avoid an over-contribution. TFSA contribution room consists of three components:

1. Annual limit set by the federal government ($7,000 for 2025)
   
2. Unused room carried forward from prior years
   
3. Amounts withdrawn in previous years – for instance, if a taxpayer withdrew $5,000 in 2024, they gain an extra $5,000 of room on 1 January 2025 (note: the extra room does not appear in 2024).

TFSA Over-Contribution Penalties and Tax Implications

TFSA over-contributions are subject to a 1% monthly tax on the highest excess amount until corrected. There is no buffer amount: even a $1 over-contribution triggers this tax. The CRA may notify the taxpayer of an over-contribution via a Notice of Assessment or an Excess TFSA Amount letter, but these typically arrive long after the excess tax first starts accruing. As a result, it is prudent for a taxpayer to act quickly if there is an over-contribution.

Correcting TFSA Over-Contributions (Using Form RC243)

If a taxpayer has an over-contribution, it is prudent to:

• Withdraw the excess funds immediately to stop additional tax from accruing.
  
• File Form RC243 (TFSA Return), due by 30 June of the year following the over-contribution; this form calculates the tax payable.
  
• Pay the tax promptly, even if the taxpayer intends to request relief.
  
• Consider using new contribution room next year. The taxpayer’s 1 January limit increase can absorb the over-contribution, but the 1% monthly tax applies until then.

TFSA Over-Contribution Relief

The taxpayer may request a refund of the 1% tax. This requires a detailed written explanation sent to the CRA’s TFSA Processing Unit. We regularly assist taxpayers with this submission.

Tax Planning and Strategies to Avoid TFSA Over-Contributions

• Track TFSA room carefully using both CRA tools and personal records.
  
• Have a withdrawal strategy for over-contributions. A common mistake is withdrawing funds and then re-contributing in the same year – this causes an over-contribution if no room remains. Wait until the next calendar year to re-contribute.
  
• Limit automatic contributions.
  
• Seek professional advice when transferring TFSAs or handling complex situations (e.g., non-residency).

Need Help?

TFSA mistakes are stressful, but you don’t have to navigate them alone. If you face CRA penalties, contact Taxpayer Law. Our seasoned team can assist with correcting TFSA over-contributions, filing Form RC243, and pursuing relief under the CRA’s discretionary powers.

We appreciate the contribution of Momina Malik in the development of this article.

This article explains the normal reassessment period found in section 154 of the Income Tax Act (Canada) (“ITA”), its timelines, key exceptions, and rights of a taxpayer disputing a reassessment.

CRA Normal Reassessment Period

The Minister of National Revenue (the “Minister”) can reassess a tax return as of right within the normal reassessment period to adjust income, deductions, or tax payable. For individuals (T1 returns) and Canadian-controlled private corporations (CCPCs), this period is three years from the date of the initial Notice of Assessment. For non-CCPCs, it is four years from the original assessment date.

The CRA starts the calculation from the date on the Notice of Assessment. Once the limitation period lapses, the tax year becomes statute-barred, meaning the Minister cannot issue a reassessment unless the Minister shows that the taxpayer made a misrepresentation attributable to carelessness, neglect, or wilful default pursuant to subsection 152(4) of the Income Tax Act (Canada) (“ITA”).

Exceptions to the Normal Reassessment Period

The Minister can generally reassess beyond the normal reassessment period if it can be shown that the taxpayer made a misrepresentation attributable to carelessness, neglect, or wilful default. The Minister can also reassess beyond the normal reassessment period if a taxpayer signs a  waiver of the normal reassessment period. This waiver allows the CRA to extend the reassessment period until the waiver is revoked.

CRA Audit Timelines

During an audit, the CRA reviews the taxpayer’s books and records to check whether the taxpayer has met its obligations. The duration of the audit varies based on the audit scope, quality of the taxpayer’s records, and CRA/taxpayer delays.

Tax Return Reassessment Rights

Upon receiving a reassessment, a taxpayer may dispute it by filing a Notice of Objection, generally due 90 days after the reassessment date. In limited circumstances, this deadline can be extended by up to one year.

Once a Notice of Objection is submitted, the CRA will review the taxpayer’s objection and may confirm, vary, or vacate the assessment. If the taxpayer disagrees with the CRA’s decision, the taxpayer can appeal to the Tax Court of Canada.

Conclusion – Get Advice

Understanding the reassessment period and ways that it can be extended allows a taxpayer to make informed decisions during a CRA audit or appeal. If you are facing a reassessment, speak with an experienced tax professional. Taxpayer Law specializes in resolving tax disputes. Let our experts help protect your rights.

We appreciate the contribution of Gurleen Ghotra in the development of this article.

This article provides a general overview of who qualifies as a “builder” under the Excise Tax Act
(Canada), R.S.C., 1985, c. E-15 (“ETA”), and outlines the GST/HST obligations that apply to
builders. It additionally highlights available rebates that may help reduce the associated tax
burden.

Who is a “Builder” Pursuant to the ETA?

The term “builder” is defined under subsection 123(1) of the ETA. The definition generally
includes anyone engaged in the business of constructing or substantially renovating a residential complex primarily for sale. In certain cases, the definition covers even those homes held for lease. The above examples presume that the construction or renovation is done in the course of a business or an adventure in the nature of trade. This broad definition can extend beyond traditional home builders to include casual or small-scale residential property renovators.

GST/HST Collection Obligations for Builders

The Canada Revenue Agency (“CRA”) imposes several obligations on someone who is
classified as a “builder.”

Builders are generally required to register for GST/HST and file periodic tax returns that report
the tax collected and paid. As part of these obligations, they must also ensure timely filing. They must also
properly collect and remit the appropriate GST/HST, and maintain accurate supporting documentation. However, small suppliers are generally exempt from these registration obligations pursuant to subsections 148(1) and 240(1) of the ETA.

A builder must charge, collect, and remit GST/HST on all taxable sales of new or substantially
renovated housing. In practical terms, when a newly built (or substantially renovated) home is
sold to a buyer, the seller is expected to add GST/HST to the sale price and later remit that tax to the Canada Revenue Agency. The builder must also maintain proper records and invoices to substantiate input tax credits, for GST/HST paid on construction costs, and to support any rebates claimed.

Self-Assessment

Further, there are rules in the ETA that require a builder to “self assess” GST/HST. Generally,
this self-assessment must be done on the later of (i) substantial completion of the property and
(ii) its occupancy by the builder. Should these self-assessment rules be triggered, the builder is
expected to determine the fair market value of the property at the triggering date and remit the
GST/HST owing. The subsequent sale of the property would generally be GST/HST exempt
pursuant to Part I of Schedule V of the ETA.

A builder who fails to charge GST/HST on a taxable home sale can later be assessed by the CRA
for the unpaid tax. This includes penalties and interest. The CRA can hold builders accountable for any uncollected tax. The average Canadian should be aware of these rules to avoid unintentionally making a taxable sale of their home. On many occasions, Canadian courts have upheld this concept. The idea is that taxpayers who repeatedly build or substantially renovate homes with an intention to sell are in fact builders who must charge GST/HST on those sales.

GST/HST Rebates for New Housing and Renovations

One silver lining for builders is the availability of GST/HST rebates on new or renovated
housing. Builders may also utilize “builder-processed” mechanisms, which generally allow a
builder to credit purchaser rebates directly to the buyer. These rebates can help offset GST/HST
obligations. Some key GST/HST rebate programs include:

• New Housing Rebate for Houses Purchased from a Builder (Form GST190; can be
• “builder-processed”)
• New Housing Rebate for Owner-Built Houses (Form GST191)
• New Residential Rental Property Rebate (Form GST524)

Taxpayers may find their housing rebate denied not only due to subtle factual disputes, but also
because of errors in legal interpretation, failure to satisfy statutory conditions, or procedural non-compliance. Successfully challenging a denial typically requires persuasive legal argumentation. It also requires careful interpretation of nuanced provisions in the ETA and strict adherence to deadlines for filing objections or appeals.

Get Professional Help with GST/HST

Navigating GST/HST rules in the construction and real estate industry can be complex. Taxpayer
Law is here to help. We have the expertise to assist taxpayers in responding to CRA audits and
appealing CRA assessments. Contact Taxpayer Law today for a consultation.

No matter how diligent you are with your taxes, understanding the difference between tax avoidance and tax evasion is crucial. While they sound similar, their consequences are vastly different.

What Is Tax Avoidance?

Tax avoidance is the legal practice of minimizing your tax liability within the framework of CRA regulations. This includes strategies such as contributing to RRSPs or TFSAs, claiming tax credits, and pension income splitting.

However, aggressive tax avoidance can attract CRA scrutiny. The line between legal tax planning and questionable tax schemes can be thin. Consulting a tax lawyer ensures your strategies remain compliant with Canadian tax laws.

What Is Tax Evasion?

Tax evasion, on the other hand, is illegal. It involves deliberately misrepresenting your financial situation, for example, underreporting income, inflating expenses, or hiding assets offshore. The CRA aggressively prosecutes tax evasion, and penalties can include hefty fines or imprisonment.

Get Taxpayer Legal Representation

Understanding the distinction between tax avoidance and tax evasion is essential. If you’re unsure whether your tax strategies comply with Canadian law, consult a tax lawyer. Legal guidance can help protect your finances, and your future.

At Taxpayer Law, we provide expert legal support to help you stay compliant and avoid tax-related pitfalls. Contact us today to safeguard your rights and financial well-being.

Are you facing tax evasion charges? This is a serious legal matter that should never be ignored.

The stress of being pursued by the CRA can feel overwhelming, and the potential consequences of tax-related offenses are severe. However, you’re not alone—many hardworking Canadians find themselves in similar situations, unsure of where to turn.

The Canadian tax system is complex, and unintentional errors can sometimes be misinterpreted as tax evasion. Whether the issue stems from unfiled tax returns, discrepancies in reported income, or misunderstandings of tax law, the CRA’s enforcement actions can be relentless. Facing the Tax Court of Canada can be daunting, making the support of an experienced tax lawyer essential.

How a Tax Lawyer Can Help

Investigating the Allegations

A tax lawyer will carefully examine the CRA’s claims, identifying any inaccuracies in their assessment and ensuring your financial records are properly reviewed.

Negotiating with the CRA

Many cases can be resolved without going to trial. A skilled tax lawyer can negotiate on your behalf to seek a fair resolution, minimizing penalties and protecting your interests.

Developing a Legal Strategy

If your case goes to the Tax Court of Canada, a tax lawyer will craft a comprehensive legal strategy tailored to your circumstances.

Providing Peace of Mind

Beyond legal expertise, a tax lawyer offers reassurance. Knowing you have a professional defending your case can ease the stress of facing tax evasion charges.

Contact Us for Legal Support

At Taxpayer Law, we understand the complexities of Canadian tax law and the challenges you may be facing. Contact us today for a consultation and let us help you navigate this difficult time.