Four and a half million Canadians have opened tax-free savings accounts since they were introduced in January, 2009.
The attraction is the account's tax free nature so there has been some confusion experienced by people who just got a tax bill for their TFSA's.
Natalie Pool is one of those was opening a tax-free savings account and contributed the maximum allowed which is five-thousand dollars.
She says she withdrew two-thousand dollars, as she's allowed, without penalty and later put the money back. There was never more than five-thousand dollars in her account. Yet she got a tax bill from the Canada Revenue Agency for over contributing to her TFSA.
Starting june 1st, the Canada Revenue Agency mailed out 72-thousand tax bills to TFSA holders. Many of whom, like Pool, withdrew and redeposited money without realizing penalties would attach.
The issue lies in the accounting, basically TFSA withdrawals aren't reflected in this calendar year, but will be shown next year. However, deposits are reflected in real time. So in Pool's case the Canada Revenue Agency would see her original five-thousand dollars deposit and her later two-thousand dollar deposit, but would not see her two-thousand dollar withdrawal, therefore it appears she over contributed two-thousand dollars and is taxed on that amount.
Because this is the first tax year people are dealing with TFSA's, H&R Block says there has been a lot of confusion.
