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TFSA Questions And Answers
Posted By Tax Guy - Burlington Accountant On January 30, 2011 @ 8:00 am In RRSP & RRIF,TFSA | 27 Comments
Any individual (other than a trust) who is a resident of Canada and is the age of majority, who has a valid SIN number is eligible to open a TFSA account.
Starting in 2009, individuals will receive $5,000 of TFSA contribution room  each year. The $5000.00 limit will be indexed to inflation and the annual additions to contribution room will be rounded to the nearest $500.00.
Unused contribution room is carried forward to future years and there is no limit on the number of years that unused contribution room can be carried forward.
Any amounts withdrawn from an individual’s TFSA in a year will be added to the individual’s contribution room for the following year.
Excess TFSA contributions  will be subject to a tax of one percent per month.
Since contributions are made from after tax income, they are not tax deductible and amounts withdrawn from the TFSA will not be taxed upon removal from the account. Capital gains and other investment income earned will not be taxed.
An individual’s spouse can contribute to their TFSA, however, the individual would need to have contribution room available and income earned on that property is income of the individual.
If an individual becomes a Non-Resident they will be allowed to maintain their TFSA, benefiting from the tax fee investment income and withdrawals. However, they will not be allowed to contribute to the account while they are a Non-Resident and contribution room will not accrue for any year throughout which the individual is a Non-Resident.
The Canada Revenue Agency (CRA) will determine TFSA contribution room for each eligible individual who files an annual income tax return. Individuals who have not filed returns for prior years (because, for example, there was no tax payable) will be permitted to establish their entitlement to contribution room by filing a return for those years or by other means acceptable to the CRA.
To provide the CRA with adequate means to determine contribution room and monitor compliance, TFSA issuers will be required to file annual information returns. The information required to be reported is expected to include, for example, the value of an account’s assets at the beginning and end of the year and the amount of contributions, withdrawals and transfers made in the year.
For more Information see Questions about the TFSA. 
Article printed from Canadian Tax Resource Blog: http://blog.taxresource.ca
URL to article: http://blog.taxresource.ca/tfsa-questions-and-answers/
URLs in this post:
 TFSA contribution room: http://blog.taxresource.ca/understanding-tfsa-contribution-room/
 Excess TFSA contributions: http://blog.taxresource.ca/tfsa-over-contributions/
 Questions about the TFSA.: http://blog.taxresource.ca/questions-about-the-tfsa/
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