In recent years, tens of thousands of Canadians paid penalties to the Canada Revenue Agency (CRA) due to Tax-Free Savings Account (TFSA) overcontributions. The penalty is 1% of the excess contribution for each month the amount is in the TFSA.

One reason for overcontributions involves account holders contributing in the early part of the year based on information in their CRA “My Account” portal.

Financial institutions have until the end of February to report clients’ TFSA transactions made in the previous year. So, in the first months of the year, what you see listed in My Account as the current year’s contribution room may not be up to date. If you only use your My Account information to determine your TFSA contribution room, you could be at risk of overcontributing.

The solution? Keep your own records of your TFSA transactions, so you always know your current contribution room. Or, if you rely only on My Account, wait until April before contributing – allowing time for last year’s data to be submitted and processed.