TFSA Contribution room VS Taxable Investment Income

TaxCycle General
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At a tax course I recently recommended (VTN, Thanks Joe!) they suggested a good “value add” would be to let clients know they still had TFSA room if they also had investment income, since they could then move taxable income producing assets into the TFSA and in future years not pay tax on that income.

I figured for sure I could add a “snippet” to my client letters that did this comparison automatically.TaxCycle, however, doesn’t seem to have the TFSA contribution room tracked anywhere.

So my work around was to add a custom field called “TFSABalancePerCRAWebsite” (data type “money”, Carryforward “no”, Review message “Required field”).

And then wrote this:

{{#CurrentClient.T1.Income.M[28] >0 or CurrentClient.T1.Income.M[29] >0 or CurrentClient.T1.Income.M[33] >0}}{{CurrentClient.customfield(“TFSABalancePerCRAWebsite”)>0}}
{{Constants.CurrentTaxationYear+1}} Tax Planning opportunity
We note that you have both investment income, and ${{format(CurrentClient.CustomFields.Table[11].CustomMoney)}} of available* contribution room in your TFSA. We suggest you speak to your broker or banker about transferring these investments (up to the contribution room limit) to your TFSA to reduce future taxes on this income.
*Your transactions that were made in 2020 are not included. Your previous year’s transactions may not have been received or processed by CRA and therefore would not yet be reflected in this amount. You should compare the TFSA transaction information we have with your own records to ensure that the information we have on record is correct. Your TFSA contribution room could change if CRA processes additional information.
{{/CurrentClient.customfield(“TFSABalancePerCRAWebsite”)>0}}{{/CurrentClient.T1.Income.M[28] >0 or CurrentClient.T1.Income.M[29] >0 or CurrentClient.T1.Income.M[33] >0}}

For a client with either dividends, interest and/or capital gains and $16000 in contribution room it returns this result:

2020 Tax Planning opportunity
We note that you have both investment income, and $16000.00 of available* contribution room in your TFSA. We suggest you speak to your broker or banker about transferring these investments (up to the contribution room limit) to your TFSA to reduce future taxes on this income.
*Your transactions that were made in 2020 are not included. Your previous year’s transactions may not have been received or processed by CRA and therefore would not yet be reflected in this amount. You should compare the TFSA transaction information we have with your own records to ensure that the information we have on record is correct. Your TFSA contribution room could change if CRA processes additional information.

Feel free to use it, and please let me know if you can think of anyway to improve it!

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The only warning I would add is to make sure this field does not carryforward the balance. Otherwise, if carried forward, it would have a balance and you might unknowingly advise the client of an incorrect TFSA balance next year.

Also, there is a TFSA balance field in the AFR(REP) screen (at the bottom). You’re correct, though, that it is not picked up by the program.

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Maybe TaxCycle will make use of the downloaded TFSA information one day, until then this is as close to automated as I could make it.

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@Cameron this would be VERY useful as a value added service for our clients!

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Edited to correct link to TFSA Balance (make sure you check your own link and the number in the square brackets will be different depending on how many custom fields you have - you can find this in the bottom left of your screen when you are on the custom field cell), and to make the year carry forward automatically.

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Hi @jglass,

I think you might be missing the # sign before the first {{CurrentClient.customfield(“TFSABalancePerCRAWebsite”)>0}}
Shouldn’t it be {{#CurrentClient.customfield(“TFSABalancePerCRAWebsite”)>0}} ?

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@Rein good catch!

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Now that CRA is actually catching people over contributing to TFSAs and issuing automatic penalties I’ve added an over contribution warning to this template.

{{#CurrentClient}}{{#customfield(“TFSABalancePerCRAWebsite”)>0 and (T1.Income.M[28]>0 or T1.Income.M[29]>0 or T1.Income.M[33]>0)}}{{Constants.CurrentTaxationYear+1}} Tax Planning opportunity
We note that you have both investment income, and ${{format(customfield(“TFSABalancePerCRAWebsite”))}} of available* contribution room in your TFSA. We suggest you speak to your broker or banker about transferring these investments (up to the contribution room limit) to your TFSA to reduce future taxes on this income.
*Your transactions that were made in {{Constants.CurrentTaxationYear+1}} are not included. Your previous year’s transactions may not have been received or processed by CRA and therefore would not yet be reflected in this amount. You should compare the TFSA transaction information we have with your own records to ensure that the information we have on record is correct. Your TFSA contribution room could change if CRA processes additional information. {{/customfield(“TFSABalancePerCRAWebsite”)>0 and (T1.Income.M[28]>0 or T1.Income.M[29]>0 or T1.Income.M[33]>0)}}
{{#customfield(“TFSABalancePerCRAWebsite”)<0}}TFSA Overcontribution
In reviewing your accounts at CRA we note that you overcontributed to your TFSA in {{Constants.CurrentTaxationYear}}, and that your contribution limit as at January 1st, {{Constants.CurrentTaxationYear+1}} remains a negative. If you have not already done so please contact the holder (bank or investment agency) and arrange for a minimum of ${{format(abs(customfield(“TFSABalancePerCRAWebsite”)))}} to be withdrawn from your TFSA. DO NOT contribute additional funds to your TFSA in {{Constants.CurrentTaxationYear+1}}. If you have already contributed additional amounts in {{Constants.CurrentTaxationYear+1}} withdraw those amounts in addition to the amount above.
*Your transactions that were made in {{Constants.CurrentTaxationYear+1}} are not included. Your previous year’s transactions may not have been received or processed by CRA and therefore would not yet be reflected in this amount. You should compare the TFSA transaction information we have with your own records to ensure that the information we have on record is correct. Your TFSA contribution room could change if CRA processes additional information. {{/customfield(“TFSABalancePerCRAWebsite”)<0 }}{{/CurrentClient}}

If you prefer to use the TFSA manually filled box on the AFR(REP) form replace customfield(“TFSABalancePerCRAWebsite”) with CurrentClient.RepresentAClient.Balance.TFSAContributionRoom anywhere it appears above.

Let me know what you think!

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That’s a great idea. I created a new template for this and copied/pasted your code. However, it doesn’t show even where I’ve entered your custom field with a negative $6,500 (for an actual client situation) and where the client has investment income. One minor item I saw was in the top condition.

I think you need “>0” after “M[29]”. Maybe there’s something else that prevents this from working but I haven’t found it yet.

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Thanks for the catch Kevin!

Tax planning opportunity - the idea of this paragraph is to point out to the client that they already have investments and that they could transfer those investments to TFSA. So the “M[28]” (and 29 and 33) are investment income amounts. So if the file you are testing on doesn’t have investment income you need to put some in.
28 = Line 12000 “Taxable amount of dividends”
29 = Line 12100 “Interest and other investment income”
33 = Line 12700 “Taxable capital gains”

If you want the paragraph to show up to inform the client of their contribution room regardless of if they have investment income then you could take out the “and (T1.Income.M[28]>0 or T1.Income.M[29]>0 or T1.Income.M[33]>0” part of the code and it would show anytime the client had available contribution room.

TFSA Overcontribution - this paragraph is only dependent on a negative in the TFSA amount field, and I failed to test if if was possible to have a negative in the TFSA field on the AFR worksheet. It is NOT (currently), so you would have to use a custom field set up if you want to use that paragraph.

A note on the set up of the custom fields, we clear that field each year (carry forward = no), and it is a required field, so it throws a review note if it isn’t filled in. This has stopped the staff missing entering this amount, which is another reason I like the custom field solution until CRA lets TaxCycle download the TFSA contribution room.

I updated the code in my August 3, 2023 post to my most current version with your correction in it. Let me know if you have any trouble!

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Thanks @jglass. I copied and pasted your code and couldn’t get it to work. The reason, after much head-scratching, is that you can’t just copy/paste. The quotation marks on the screen are not pasted as the quotation marks you need to code in the template editor. Wow, what a revelation that was!

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Well! Who knew! I’ll add that to the instructions next time I post any code!

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@jglass, I was working on this template over the weekend. This is really value-added information for the client. The one change I’d recommend is with respect to how much the client should remove from their TFSA. CRA assesses the overcontribution penalty based on the calendar year. Once Dec 31 of any year is passed, the client can’t retroactively fix the overcontribution amount. Therefore, I created a custom field called CYTFSAAddition which holds the amount by which the current year (2023 for 2022 T1’s) TFSA limit increases ($6,500 for 2023).

The change I made was to suggest that the client only withdraw an amount from the TFSA if the overcontribution exceeds the additional room they got on January 1 of the current year. And if that is the case, the suggested withdrawal should only be for the overcontribution amount minus the additional TFSA room as of January 1.

If the overcontribution was less than the current year additional TFSA room, I advise the client that their overcontribution has been cleared up but they should review their 2023 TFSA contributions to ensure they’re not in the same situation.

Beyond that, I just made some wording changes that go with my personal writing style but they’re not important to the results.

{{#customfield(“TFSABalancePerCRAWebsite”)<0}}TFSA Overcontribution

CRA’s information shows that you had overcontributed to your TFSA as of December 31, {{Constants.CurrentTaxationYear}} by ${{format(abs(customfield(“TFSABalancePerCRAWebsite”,“C0”)))}}. As of January 1, {{Constants.CurrentTaxationYear+1}}, you were entitled to another ${{format(customfield(“CYTFSAAddition”,“C0”))}} TFSA contribution room. {{#abs(customfield(“TFSABalancePerCRAWebsite”))-customfield(“CYTFSAAddition”)<=0}} Although this additional room as of January 1, {{Constants.CurrentTaxationYear+1}} cleared up your overcontribution, CRA may still assess you with a penalty for {{Constants.CurrentTaxationYear}}.{{/end}}{{#abs(customfield(“TFSABalancePerCRAWebsite”))-customfield(“CYTFSAAddition”)>0}}If you have not already done so, you should contact your bank or investment advisor to arrange a minimum withdrawal of ${{format(abs(customfield(“TFSABalancePerCRAWebsite”))-customfield(“CYTFSAAddition”))}} from your TFSA.
{{/end}}

You should not contribute additional funds to your TFSA in {{Constants.CurrentTaxationYear+1}} until your overcontribution situation at December 31, {{Constants.CurrentTaxationYear}} has been clarified and resolved. If you have already made TFSA contributions in {{Constants.CurrentTaxationYear+1}}, we may suggest you make a TFSA withdrawal in addition to any amount suggested above.

Please note that TFSA transactions in {{Constants.CurrentTaxationYear+1}} have not been considered in the above calculations. Details of your previous year’s transactions may not have been received or processed by CRA and therefore may not yet be reflected in our calculations. You should compare CRA’s TFSA transaction information with your own records to ensure the information we have on record is correct. Your TFSA contribution room could change if CRA processes additional information.

{{/end}}

Thanks for your contribution.

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Glad you believe it will be useful!

We use the January 1 TFSA contribution room, which already includes the current year contribution room increase. We use this so no further calculation for that is needed, and because it is shown on the ‘front page’ of the client’s CRA account and that reduces the amount of time it takes to gather the information.

But you have made me consider if I should add a paragraph about the expected penalty if they had over contributed in the prior year even if it was resolved. Good thought. Thanks!

I don’t want to get into calculating the penalty as I don’t think we can bill for that, but a warning that CRA could assess penalties is a great idea. Perhaps if the TFSA room is less than the CY increase a paragraph could show informing the client of the potential for penalties. Hmmm. Interesting problem.

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I agree that I wouldn’t calculate the penalty. That’s more than what the template is for.

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This great information. I hope TaxCycle will take this into consideration for those of us who are not as savvy in templates editing as the two of you are. Klaus Theyer, Exact Tax Service

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