After opening my TFSA and putting money in, I thought I was done.
In Part 1, I confirmed my contribution room. In Part 2, I added QQQX. Set up automatic transfers and call it good — that’s what I assumed.
But the more I read about TFSA, the more I came across rules that surprised me. The same questions kept showing up in Korean immigrant communities online. “I almost made this exact mistake,” I kept thinking.
What makes this tricky is that nobody tells you about these rules when you open the account. Not the bank. Not the Wealthsimple app. They just open it and move on. The mistakes accumulate quietly — and the CRA letter arrives later.
Mistake 1 — Withdrawing and Re-contributing in the Same Year
One of the big advantages of a TFSA is that “withdrawn amounts are added back to your contribution room.” That’s true. But there’s an important condition: that room isn’t restored until January 1 of the following year.
If you withdraw money in one year and put it back in the same year, the CRA treats it as an over-contribution. Here’s what that looks like in practice:
| Timeline | Action | Result |
|---|---|---|
| Jan 2026 | Remaining room: $7,000 | |
| March 2026 | Contribute $7,000 | Room used up |
| June 2026 | Withdraw $5,000 | Room not yet restored |
| July 2026 | Re-contribute $5,000 | $5,000 over-contribution |
Many people assume “I withdrew it, so the room came back.” But that $5,000 of room doesn’t return until January 1, 2027. Re-contributing in July 2026 is treated as going over the limit.
What makes this especially dangerous: there’s no warning at the moment you contribute. Wealthsimple won’t stop you. The penalty shows up later — in a letter from the CRA after year-end.
There is an exception: if you still have unused room from earlier in the year.
| Timeline | Action | Result |
|---|---|---|
| Jan 2026 | Remaining room: $7,000 | |
| March 2026 | Contribute $3,000 | $4,000 room remaining |
| June 2026 | Withdraw $3,000 | |
| July 2026 | Contribute $4,000 | No problem (within the $4,000 remaining room) |
The key: what you can put back in the same year is limited to the original unused room — not the amount you just withdrew. If this is confusing, the simplest rule is to leave withdrawn money on the sidelines until January 1.
⚠️ Note on CRA My Account: The contribution room shown in CRA My Account reflects data from the previous year. Contributions made this year won’t be deducted from what CRA shows. Track your own contributions and subtract them manually.
Mistake 2 — Over-Contributing Without Realizing It (and Leaving It)
If you only have one TFSA account, accidental over-contributions are less common. The more frequent problem is having TFSA accounts at multiple institutions — a TD account here, a Wealthsimple account there — and losing track of the combined total.
The CRA sees all your TFSA accounts combined. If the total exceeds your contribution room, the excess is taxable at 1% per month until it’s withdrawn.
| Excess Amount | Monthly Penalty | Annual Total |
|---|---|---|
| $1,000 | $10 | $120 |
| $2,000 | $20 | $240 |
| $5,000 | $50 | $600 |
If you discover you’ve over-contributed:
- Check your TFSA contribution room in CRA My Account. A negative number means you’re over the limit.
- Withdraw the excess immediately. The 1% monthly penalty stops as soon as the excess is removed.
- File Form RC243 (TFSA Return) and pay any penalty already accrued by June 30 of the following year. Missing this deadline adds more penalties.
Worth knowing: if it was an honest mistake — especially for newcomers who weren’t aware of the rules — you can send a letter to the CRA requesting a penalty waiver. For small, first-time over-contributions, the CRA sometimes grants relief. No guarantee, but it’s worth trying.
Mistake 3 — Contributing to a TFSA After Leaving Canada
This one matters most for immigrants. Whether it’s a temporary return to Korea, a longer stay, or a full relocation — if you’re no longer a Canadian tax resident, you cannot contribute to your TFSA during that period.
Contributing while non-resident triggers a 1% monthly tax on those contributions — separate from, and in addition to, any over-contribution penalty.
The tricky part: leaving Canada doesn’t automatically make you a non-resident for tax purposes. The CRA looks at your residential ties — whether you have a home available in Canada, whether your spouse or children remain here, whether you maintain Canadian bank accounts or a driver’s license. The more ties you keep, the more likely you’re still considered a Canadian tax resident.
| Residential Tie | Weight |
|---|---|
| Spouse / common-law partner remains in Canada | Strong |
| Dependants (children) remain in Canada | Strong |
| Home available for your use in Canada | Strong |
| Canadian bank accounts, credit cards | Secondary |
| Canadian driver’s license | Secondary |
| Provincial health card | Secondary |
If you’re planning a long-term departure and most of these ties will be severed, submitting Form NR73 (Determination of Residency Status — Leaving Canada) to the CRA will get you a formal opinion on your residency status. Ambiguity is more expensive than clarity.
You Don’t Have to Close Your TFSA When You Leave
There’s no requirement to close your TFSA if you leave Canada. Just stop contributing. Any investments already in the account — like QQQX — continue to be held and grow. When you return to Canada and re-establish residency, your contribution room starts accumulating again and contributions can resume.
TFSA vs. RRSP Withdrawals as a Non-Resident
| TFSA | RRSP | |
|---|---|---|
| Canadian withholding tax on withdrawal | None | 25% (may be reduced by tax treaty) |
| Why | Funded with after-tax money | Contributions were pre-tax deductions |
| Room restored after withdrawal | Yes — Jan 1 (residents only) | No — permanent |
RRSP withdrawals are expensive for non-residents — 25% goes to the CRA off the top. TFSA withdrawals don’t trigger Canadian withholding tax since they were funded with after-tax money.
That said, if you’ve returned to Korea and become a Korean tax resident, TFSA withdrawals and gains may be reportable under Korean tax law. Korea does not recognize TFSA as a registered tax-exempt account, so treatment can vary. For significant amounts, consult a tax professional familiar with both tax systems.
The Common Thread
All three mistakes share one thing: leaving them unaddressed is always the most expensive option. The moment you catch one, you can stop the damage. The problem is that there’s no warning system — which is exactly why knowing these rules in advance matters.
TFSA is still one of the most useful accounts available in Canada. These rules are just the fence around it. Know the fence, and the account works exactly as it should.
If you don’t have a Wealthsimple account yet, signing up through this link may qualify you for a cash bonus.
TFSA Series
- Part 1: TFSA Guide for Canadian Immigrants: Eligibility, 2026 Contribution Limit & CRA Check
- Part 2: Don’t Leave Your TFSA as a Piggy Bank — How to Invest in NASDAQ-100 Tax-Free with QQQX
- Part 3: 3 Common TFSA Mistakes: Over-Contribution, Re-Contribution Timing, and What to Do When You Leave Canada ← you are here
📌 Also read: RRSP Contribution Limit 2026: How to Check Your Limit and Maximize Your Tax Refund