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The maximum annual contribution limit to a TFSA is $5000 per year. This makes it a good emergency fund vehicle. If I:

  • transfer money out before the new $5000 contribution credit starts for a new year do I have to wait before replacing the money? Or am I subject to the penalty?
  • transfer money from one institution to another do I get reported twice to the CRA? In which case am I subject to the penalty?

On what amount do I pay the 1% penalty? Is the formula:

(TOTAL - $5000) * 0.01

or

(TOTAL - $5000) * n * 0.01 where n is the number of months over

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The relevant Canada Revenue Agency web site is Tax payable on excess TFSA amount

Withdrawing in the same year does not generate additional room. Details from CRA suggest it is best to avoid withdrawing if you expect you would replenish in the same year.

Likewise, you can transfer among your various accounts without penalty. If you change financial institutions, for example, there is no double reporting as you seem to be concerned about if it is tracked as a TFSA Transfer (similar to an RRSP transfer) from one registered account to another. The paperwork is not as if it was a deposit but merely a transfer.

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