How to Cancel TFSA Overcontribution Penalties in Ottawa

People in Ottawa ask me this all the time. They get a TFSA letter from CRA saying they overcontributed, and now they owe hundreds or even thousands in penalties. Most of the time, they didn’t even know they did anything wrong.

It usually starts with something innocent. Moving money between banks, recontributing too early in the year, or just not realizing how much room they had left.

Here’s what to do.

Step 1 - Remove the Extra Money

This part is important. CRA will not even look at your request unless you first remove the overcontributed amount. That means taking it out of your TFSA, not just moving it to another bank or investment account.

Step 2 - Double Check the Numbers

Sometimes CRA's math is delayed or incorrect. Especially if you have multiple TFSAs, or if a transfer was reported incorrectly.

You can use a simple tool like this to figure out your actual contribution room:
MoneySense TFSA Calculator

Also check CRA’s official guide:
CRA TFSA Guide

Check this out too:

Step 3 - Write a Short Letter

You don’t need anything fancy. Just write to CRA explaining what happened. Include:

• What caused the overcontribution
• When you removed the excess
• Why it was an honest mistake
• Any proof, like bank statements or screenshots

If you received a TFSA return or penalty letter, include a copy.

You can send this letter directly or use CRA’s Form RC4288, which is for requesting penalty relief. Either works.

Step 4 - Send It In

You can send your request:

• By mail to CRA's Sudbury office (mostly for people who need help in Ottawa)
• Or through your CRA My Account under “Submit Documents”

Make sure you send it in as soon as possible. CRA prefers to hear from you within 90 days of the penalty notice.

What Are the Chances CRA Cancels the Penalty?

If this is your first time, and you fixed it quickly, CRA may cancel it. I’ve helped many clients in Ottawa with TFSA penalties.

But if it keeps happening year after year, the odds go down. In those cases, I’ve had to build a stronger case, showing that it wasn’t intentional and that the taxpayer acted as soon as they found out.

Real Case from Ottawa

‍

Final Thoughts

TFSA mistakes are more common than people think. CRA doesn’t send warnings, they just charge the penalty and expect you to deal with it.

But there’s a system in place to fix it. If you made an honest mistake, acted quickly to correct it, and can explain what happened, you have a good chance.

If you’re not sure where to start, send me a message. I’m a CPA based in Ottawa and I deal with CRA all the time. I’ve handled this exact situation for a lot of people just like you.

Helpful links and resources

• CRA TFSA Guide
• MoneySense TFSA Room Calculator
• Reddit Thread - TFSA Penalty Experiences
• Another TFSA Repayment Reddit Discussion

If you're in Ottawa and need help with this, you can reach out.

‍
Email: hello@taxesmadesimple.ca
Text: 613-600-4194

No sales pitch, just clear answers.

‍