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For example, just this week, a reader wrote to me about the troubles he was having dealing with his 86-year old mother’s TFSA overcontribution tax problem, owing to a bank reporting error (not CIBC, I was assured), that occurred when her spouse died. His mother was listed as the successor holder on her spouse’s TFSA, but the funds were transferred as a contribution leading to penalty tax.

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Occasionally, a TFSA overcontribution tax dispute will reach the courts, which was the case with an Alberta taxpayer who faced off against the CRA in a Calgary courtroom last month. The taxpayer went to Federal Court seeking a judicial review of the CRA’s decision to deny him relief from the taxes and penalties imposed for his TFSA overcontributions.

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The taxpayer’s TFSA troubles began back in 2021 when he opened multiple TFSAs. In May 2022 the CRA sent him a notice advising him that he had overcontributed to his TFSAs in 2021. The overcontribution tax is equal to one per cent per month on the amount overcontributed until it’s withdrawn (or until new TFSA room subsequently opens up in a future year). The notice advised him that he could correct the overcontribution by withdrawing the overcontributed amount immediately, and that if it was not corrected, he would be liable for additional penalty tax.

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Unfortunately, the taxpayer didn’t receive the CRA’s overcontribution notice because he had not updated his mailing address with the CRA. As an aside, if you move, it’s important to notify the CRA of your change of address, which can be done in a number of ways, including online, by phone, by mail and even when you file your return (but only if you paper file, or you have your return filed electronically through a tax preparer or authorized service provider using EFILE). You cannot change your address when using NETFILE to file your own return.

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The taxpayer had overcontributed to his TFSAs in 2022 and 2023 by about $142,000 and $162,000, respectively. As a result, he was subject to additional taxes and penalties of about $10,000 for 2022, and $25,000 for 2023.

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In September 2023 the taxpayer wrote to the CRA requesting discretionary relief. The CRA declined his request. The taxpayer then submitted a second request, providing several explanations including his late awareness of the overcontributions, his lack of knowledge of the consequences of his overcontributions, his financial hardship and his inability to remove excess funds from his TFSAs because investment losses had depleted the accounts. He also expressed remorse and highlighted his good faith efforts to comply with CRA requirements.

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In June 2025 the CRA again declined to provide relief. The CRA’s written decision indicated that the taxpayer “did not make a reasonable error because it was his responsibility to maintain records, review his statements, and request information if he needed it.” The decision also noted that he never corrected his overcontributions.