Got email from the CRA? Make sure you check it or you could end up paying — big time
If you filled in your email address on the front page of your T1 personal tax return, you have officially registered to receive most Canada Revenue Agency communications via email notification. This means the onus is on you if you forget to check your email and miss an important communication, which could end up costing you big time should you miss a CRA notice of reassessment.
Take, for example, a recent tax case decided in early October which involved yet another taxpayer who overcontributed to his tax-free savings account (TFSA). The taxpayer was in Federal Court requesting a judicial review of the CRA’s decision in which the agency refused to waive the overcontribution taxes he had incurred because of overcontributing to his TFSA during the 2021 taxation year.
Under the Income Tax Act, the CRA may exercise its discretion to waive or cancel the overcontribution tax if a reasonable error resulted in the excess contribution, and action was taken right away to remove the excess contribution.
On July 20, 2021, the CRA issued a TFSA notice of assessment (NOA) for the taxpayer’s 2020 tax year advising him that he had overcontributed to his TFSA in October, November, and December of 2020. The tax was calculated based on one per cent per month of the overcontributed amount.
The taxpayer was also told that to limit future penalty tax, he should immediately withdraw from his TFSA any excess amount that may be held there. In addition, the taxpayer was cautioned that he had “negative contribution room” for 2021 because the overcontribution he had made in the 2020 tax year exceeded his 2021 TFSA contribution limit.
On July 26, 2022, the CRA issued to the taxpayer a second TFSA notice of assessment (NOA), this time for the 2021 tax
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