The CRA’s administration of the Tax-Free Saving Account

The CRA’s Taxpayers’ Ombudsman reported that several taxpayers contacted the Taxpayers’ Ombudsman office complaining the Tax-Free Savings Account (“TFSA”) rules related to withdrawals and over-contributions were confusing. In addition, the Taxpayers’ Ombudsman noted several media reports describing taxpayer confusion regarding the TFSA rules.

In these circumstances, the Taxpayers’ Ombudsman conducted an investigation to determine whether the CRA’s TFSA information and administration complied with the Taxpayer Bill of Rights. In particular, the Taxpayers’ Ombudsman investigation focused on whether the CRA had provided taxpayers with complete, accurate, clear, and timely information and whether taxpayers who had inadvertently over-contributed to their TFSA and penalized were treated fairly.

The Taxpayers’ Ombudsman released a special report entitled Knowing the Rules: Confusion about the rules governing the Tax-Free Savings Account. The report stated that “[t]he CRA should have been more proactive in informing Canadians about the tax consequences of the TFSA”. In light of this finding, the Taxpayers’ Ombudsman recommended that the CRA:

• take steps to make Canadians more aware of the information it provides about the TFSA on its Web site, in print, and elsewhere;
• continue to update the information available on the TFSA and be proactive in informing Canadians about how to find the tax rules governing the TFSA; and
• continue to work with the financial services sector to ensure that the CRA’s information products about the TFSA are widely available.