The Canada Revenue Agency is looking to collect more than $75 million in taxes from Canadians who may be running afoul of the tax-free savings account rules.
The CRA said that while most Canadians are using their tax-free savings accounts, or TFSAs, properly, 鈥渢here are a small number of wealthy individuals using these accounts in aggressive tax planning.鈥�
鈥淭hese individuals are putting millions of dollars into TFSAs by manipulating valuations and/or using non-arms length transactions to work around contribution limits,鈥� the CRA said in a statement Tuesday.
The CRA said it has been conducting TFSA audits since 2011 and has selected less than one per cent cent of accounts for review.
The audits have identified $75 million owed due to inappropriate use of TFSAs. The CRA said about 20 per cent of that amount came from audits which looked at TFSAs that were considered to be 鈥渃arrying on a business,鈥� such as day-trading stocks and other securities.
The rest of the money is owed due to 鈥減rohibited investments, swap transactions, and valuation concerns,鈥� among other issues, the CRA said.
鈥淭he number is high. We know that there are people doing things with TFSAs that they maybe shouldn鈥檛,鈥� said Jamie Golombek, the managing director of tax and estate planning at the CIBC Wealth Strategies Group.
Golombek told BNN that a lot of people also may be inadvertently over-contributing to their TFSAs. But he said the average TFSA holder is not actively involved in day trading and shouldn鈥檛 have to worry about the latest CRA warning.
鈥淚f there鈥檚 too much activity in a TFSA, there is a risk for some people, particularly I would say professionals, traders,鈥� he said.
The CRA said that although over-contributions were not the focus of its audits, they 鈥渕ay have been identified as part of the non-compliance in the audit and would therefore be reflected in the $75M.鈥�
The annual TFSA contribution limit is currently set at $5,500 per year, with up to $52,000 in cumulative contribution room. If TFSA deposits exceed an account holder鈥檚 contribution room for the year, he or she may be subject to a tax on the excess amounts, the CRA said.
鈥淭axpayers are liable to a 1 per cent tax per month on your highest excess TFSA amount in each month,鈥� the CRA said. 鈥淭his tax will accumulate until the excess amount is withdrawn. If a taxpayer has excess contributions, they should withdraw the funds immediately to avoid any additional tax.鈥�
In the 2015 tax year, approximately 20,000 Canadians, or only 0.16 per cent of the 12.7 million TFSA holders, were issued notices as result of TFSA excess contributions.
With files from BNN and 麻豆影视鈥檚 Chief Financial Commentator Patricia Lovett-Reid
