If you have to pay tax on a TFSA
A Tax-free Savings Account (TFSA) is designed to let you earn and withdraw money tax-free. But in some cases, you may have to pay tax.
On this page
- Why you may owe tax
- How to file a TFSA Return
- TFSA tax waiver or cancellation
- If you disagree with your TFSA notice of assessment
Why you may owe tax
You don't usually pay tax on the income you earn in your TFSA. But there are situations where tax may apply.
A TFSA may be taxable if you have any of the following in your account:
- Excess amount
- You contribute too much to your TFSA and have an excess amount in your account
For more information: Tax on excess amounts - Non-resident contribution
- You contribute to your TFSA when you are a non-resident of Canada
For more information: Tax on non-resident contributions - Non-permitted investment
- You have non-permitted investments in your TFSA (including prohibited or non-qualified investments, or an advantage)
For more information: Tax on non-permitted investments
How to file a TFSA Return
If you have taxable amounts in your TFSA, you must complete and file a TFSA Return (Form RC243) by June 30 of the calendar year after the year the tax applies.
The TFSA Return can help you calculate the amount of tax you owe. Depending on your situation, you may also need to complete and submit additional schedules.
For tax forms and information:
- How to report excess amounts
- How to report non-resident contributions
- How to report non-permitted investments
TFSA tax waiver or cancellation
The CRA may waive or cancel all or part of the tax on a TFSA if we determine that it is fair to do so. We will review your situation to determine:
- If the tax arose because of a reasonable error
- The extent to which the transaction(s) that lead to the tax also lead to another tax under the Income Tax Act
- The extent to which withdrawals have been made from the TFSA to correct the error
What is a waiver or a cancellation
A waiver is when the CRA grants a relief of penalties and interest that you would otherwise have to pay before they are assessed or charged to you.
A cancellation is when the CRA grants a relief of the penalties and interest that have already been assessed or charged to you.
How to request a tax waiver or cancellation
To request a waiver or cancellation of the tax, send the CRA a letter that explains why the taxable situation happened and why it would be fair to waive or cancel the tax.
Submit your request using one of the following methods:
Online: Option 1
Use “Submit documents” in your CRA account
By mail: Option 2
Mail your request to one of the following:
Sudbury Tax Centre
TFSA Processing Unit
Canada Revenue Agency
Sudbury Tax Centre
Post Office Box 20000, Station A
Sudbury ON P3A 5C1Winnipeg Tax Centre
TFSA Processing Unit
Canada Revenue Agency
Winnipeg Tax Centre
Post Office Box 14000, Station Main
Winnipeg MB R3C 3M2
If you want a second review
If you do not agree with our decision about your request to waive or cancel the tax, you may request a second review. Use either “Submit documents” in your CRA account or one of the mailing addresses provided above.
If you still disagree with our decision after the second review, you may apply to the Courts Administration Service or contact your local Federal Court Registry Office.
If you disagree with your TFSA notice of assessment
If you think the CRA made a mistake in your TFSA notice of assessment (NOA) or you disagree with how your tax was calculated, you may submit a notice of objection within 90 days of the date on your NOA.
To file an objection, complete and submit a Notice of Objection – Income Tax Act (Form T400A).
Or you may instead send a signed letter to the Chief of Appeals at your tax services office or tax centre.
For more information on your right to object: Objection and appeal rights