Pitfalls, Protection and Official Sources
RRSP and TFSA mistakes that cost Canadians money, and the official sources to check
The twelve most common registered-account handling mistakes in Canada, what each one costs, how to fix it, and the official bodies to check: CRA, Revenu Québec, FCAC, CIRO, CIPF and CDIC.
Most money lost in RRSPs and TFSAs is lost through handling mistakes, not markets: re-depositing a TFSA withdrawal in the same year, cashing out an RRSP to move it to another institution, contributing investments at a loss, misreading RRSP room, missing Home Buyers' Plan repayments, letting a large RRIF trigger the OAS recovery tax, forgetting beneficiaries, or contributing to a TFSA after moving abroad. Each one has a known fix, and most can be prevented with a direct transfer form, a personal contribution log and an annual check of CRA My Account.
This page is the hub of the Pitfalls, Protection and Official Sources section and links to every guide in it. General information, not financial or tax advice.
The twelve mistakes at a glance
| Mistake | What it costs | Fix or prevention | Guide |
|---|---|---|---|
| Re-contributing a TFSA withdrawal in the same year without room | 1% a month on the excess | Wait until January 1; withdraw the excess at once | TFSA re-contribution mistakes |
| Withdrawing to move an RRSP or TFSA to a new institution | RRSP: taxable income and lost room; TFSA: uses new room | Direct transfer (T2033 or the receiving institution's TFSA form) | Transfers between institutions |
| Contributing investments in kind at a loss | Capital loss denied | Sell first, contribute cash | RRSP room |
| Misreading RRSP room (forgetting a pension adjustment or group plan) | 1% a month above the $2,000 cushion | Recalculate from the notice of assessment; file T1-OVP | RRSP room |
| Spending the full RRSP withdrawal | Unexpected balance owing at filing | Set aside the difference between withholding and your marginal rate | Withholding example |
| Missing an HBP or LLP repayment | Shortfall added to income | Diarize the repayment; check the notice of assessment | HBP and LLP |
| Spousal RRSP withdrawal within three calendar years | Income taxed to the contributor | Track contribution years; contribute in December | Spousal RRSP |
| Large RRIF withdrawals in OAS years | 15% OAS recovery on income above the threshold | Draw down earlier, split pension income, use the TFSA | OAS clawback |
| No or outdated beneficiary or successor holder | Tax on death, delays, probate costs | Review designations after life events | Beneficiaries |
| Contributing to a TFSA while non-resident | 1% a month on the contribution | Stop contributions before leaving | Leaving Canada |
| US dividend stocks in a TFSA | 15% US withholding lost | Hold them in an RRSP if appropriate | US dividend withholding |
| Paying high fees without noticing | Can reach tens of thousands over decades (illustrative) | Read MERs and annual cost reports | Fees and MER |
Three mistakes in more detail
Holding non-qualified or prohibited investments
RRSPs, TFSAs and FHSAs can hold most publicly traded securities, GICs and funds. Shares of a private corporation in which you have a significant interest, or certain other holdings, are prohibited or non-qualified, and special taxes of up to 50% of the value can apply, as well as tax on the income. Before buying anything unusual in a registered account (private company shares, mortgages on property you are connected to, crypto held directly), ask the institution whether it is qualified.
Running a business in a TFSA
The CRA has taxed some TFSA holders whose frequent, short-term trading it considered to be carrying on a business. Whether that applies depends on the facts (frequency, holding periods, knowledge, time spent). Long-term investing is not affected, but very active traders should be aware of the risk.
Treating My Account as real time
CRA My Account room figures are based on information institutions send, often once a year. A January deposit, a withdrawal in March and a transfer in June may not appear for months. Your own log is the record that keeps you safe.
What to do if you have already made a mistake
- Stop it growing. Remove an over-contribution or a TFSA deposit made while non-resident immediately; the tax runs monthly.
- File the right form. RC243 for TFSA excess, T1-OVP for RRSP excess, RC727 for FHSA excess, T2205 for spousal attribution.
- Ask for relief where it is fair. The CRA can waive or cancel taxes on excess contributions when the error was reasonable and corrected without delay, and the taxpayer relief provisions allow requests for penalty and interest relief within ten years. Explain what happened and when you fixed it.
- Escalate if needed. If an institution caused the problem (a transfer processed as a withdrawal, for example), complain to the institution first; see complaints.
Official sources to check, and what each one covers
| Body | What to check there |
|---|---|
| Canada Revenue Agency (CRA) | Rules for every registered plan, your room in My Account, forms and relief requests |
| Revenu Québec | Quebec tax treatment, Quebec withholding, RL slips |
| Department of Finance Canada | Budget announcements that change limits and rules |
| Justice Laws Website | The Income Tax Act and Income Tax Regulations |
| Financial Consumer Agency of Canada (FCAC) | Bank obligations, plain-language guides, complaints about federal financial institutions |
| Canadian Investment Regulatory Organization (CIRO) | Investment dealer and mutual fund dealer rules, adviser checks |
| Canadian Securities Administrators and provincial regulators (AMF in Quebec) | Securities registration, investor warnings |
| Canadian Investor Protection Fund (CIPF) | Protection if a member dealer becomes insolvent |
| Canada Deposit Insurance Corporation (CDIC) | Deposit insurance categories and members |
| Ombudsman for Banking Services and Investments (OBSI) | Independent dispute resolution |
Frequently asked questions
Does the CRA always charge the 1% tax?
It is assessed automatically when an excess is reported, but you can ask for a waiver when the error was reasonable and quickly fixed.
Can I fix a transfer done as a withdrawal by putting the money back?
For an RRSP, putting it back uses new room and does not undo the income inclusion. For a TFSA, re-depositing in the same year needs unused room. Act before re-depositing.
Who do I contact first, the CRA or my institution?
Your institution, if it made the error; the CRA for room, assessments and relief requests.
Official sources
- Canada Revenue Agency — registered plan rules, My Account and taxpayer relief
- Revenu Québec — Quebec rules and slips
- Financial Consumer Agency of Canada — consumer rights and complaints about banks
- Canadian Investment Regulatory Organization — dealer and adviser oversight
- Justice Laws Website — Income Tax Act and Regulations
