What is the penalty for TFSA over-contribution?

The CRA charges 1% per month on the excess amount. For example, $5,000 over-contribution costs $50/month ($600/year) until corrected. The penalty is calculated on the highest excess during each month.

How do I fix TFSA over-contribution?

Withdraw the excess amount immediately to stop future penalties. Report over-contribution on form RC243. You may request penalty relief with form RC243-SCH-A if it was a reasonable error.

Can CRA waive TFSA over-contribution penalty?

Yes, the CRA may waive penalties in cases of reasonable error, especially first-time occurrences. Submit RC243-SCH-A with explanation. They consider if you withdrew quickly and circumstances of error.

How to Fix TFSA Over-Contribution Canada 2026

Understanding TFSA Over-Contribution

How It Happens

Common Cause	Explanation
Withdraw and re-contribute same year	Room doesn’t return until January 1
Multiple accounts	Losing track of total contributions
Transfer mistakes	Contribution instead of transfer
Miscounting room	Incorrect calculation
Not checking My Account	Outdated information

The 1% Penalty

Over-Contribution	Monthly Penalty	Annual Cost
$1,000	$10	$120
$3,000	$30	$360
$5,000	$50	$600
$10,000	$100	$1,200

Penalty applies to each month the excess exists.

Step-by-Step Fix

Step 1: Confirm Over-Contribution

Action	How
Check CRA My Account	Shows contribution room
Review all TFSA accounts	Add up contributions
Check withdrawals	Same year re-contributions
Calculate	Contributions - Room = Excess

Step 2: Withdraw Excess Immediately

Action	Details
Calculate exact excess	Every dollar counts
Withdraw from any TFSA	Remove the excess
Document withdrawal	Keep records
Don’t re-contribute	Room comes next January

Step 3: Report to CRA

Form	Purpose
RC243	Report TFSA return for over-contributions
RC243-SCH-A	Request penalty waiver
Due date	90 days after calendar year

Step 4: Pay or Request Relief

Option	When
Pay penalty	Quick resolution
Request waiver	Reasonable error
Both	Pay, then appeal if denied

Requesting Penalty Relief

Grounds for Relief

Situation	Likelihood of Approval
First offense	Good
Reasonable error	Good
Withdrew quickly	Helps case
Complex circumstances	Moderate
Repeated offense	Low
Intentional	Very low

What to Write in Request

Include	Example
What happened	“I withdrew $10,000 in March and re-contributed in June, not realizing room doesn’t reset until January”
When you discovered	“I discovered the error in October when reviewing My Account”
How quickly you fixed	“I immediately withdrew the excess on October 15”
Request	“I respectfully request waiver of the penalty due to my reasonable error and immediate corrective action”

Sample Letter

To CRA:

Re: Request for TFSA Over-Contribution Penalty Relief
SIN: XXX-XXX-XXX

I am writing to request relief from the TFSA over-contribution 
penalty for [year].

Circumstances:
[Explain what happened]

Corrective Action:
[Explain when you discovered and withdrew excess]

I understand the rules now and this will not happen again.
I respectfully request the penalty be waived due to 
reasonable error.

Sincerely,
[Your name]

Common Scenarios

Scenario 1: Withdraw and Re-Contribute

Event	Impact
January: $10,000 room	Starting point
March: Withdraw $5,000	Room still $10,000
June: Contribute $12,000	$2,000 over-contribution
Fix	Withdraw $2,000 now

Scenario 2: Multiple Accounts

Account	Contribution
Bank A TFSA	$40,000
Bank B TFSA	$25,000
Broker TFSA	$30,000
Total	$95,000
Lifetime room	$88,000
Over-contribution	$7,000

Scenario 3: Transfer Gone Wrong

What Happens	Result
Request transfer	Bank A to Bank B
Bank A sends cheque to you	Instead of direct transfer
You deposit to Bank B	Counted as new contribution
Fix	Contact banks, document error

Preventing Future Over-Contributions

Best Practices

Practice	How
Track in spreadsheet	All contributions/withdrawals
Check My Account	Before contributing
One main TFSA	Easier to track
Transfer properly	Institution to institution
Wait until January	For withdrawn amounts

Contribution Room Rules

Rule	Details
Annual limit	Added January 1 each year
Withdrawals	Add room NEXT January 1
Unused room	Carries forward
Transfers	Must be institution-to-institution

CRA Timeline

Assessment Process

Event	Timing
Over-contribution	Month occurs
CRA notice	6-18 months later often
Form due	90 days after year end
Payment due	When assessed
Appeal deadline	90 days from assessment

If CRA Contacts You

Action	Response
Review their letter	Understand the claim
Gather records	Contribution/withdrawal dates
Calculate	Verify their math
Respond	Pay or dispute