CRA sent me a TFSA "education letter" about overcontribution — I already withdrew the excess. Do I still have to file anything?
Yes — withdrawing the excess was the right first move, but you still have to file a TFSA Return (Form RC243). The CRA says so directly: after you withdraw the excess amount you don't need to call them, but you are still required to report the excess by filing the return. The education letter is a warning, not a bill. Ignore it, and the next letter you get will be a Notice of Assessment — with tax, penalties, and interest attached.
Education letter vs. Notice of Assessment
| Education letter | Notice of Assessment (NOA) | |
|---|---|---|
| What it is | A heads-up that your issuer reported an excess, sent in late spring via your CRA account or mail | A formal assessment of the tax you owe |
| Tax due now? | No — it's a warning to act | Yes — it calculates 1%-per-month tax, plus possible penalties and interest |
| What to do | Withdraw the excess immediately, then file Form RC243 | Pay what it says, then appeal if you disagree |
The education letter typically goes to first-time overcontributors. It tells you your contribution limit and asks you to "remove any excess contributions right away." Withdrawing stops the 1%-per-month tax clock — each calendar month the excess sat in the account is still taxed, but the bleeding ends once it's out.
Why filing RC243 is still mandatory
CRA issuers must report your TFSA transactions by the end of February of the following year — so the CRA already knows the excess existed. The CRA's position is unambiguous: whether or not you received a notification, you are required to file a TFSA Return for the excess amount. If you don't file, you may receive a TFSA notice of assessment later in the summer — and the tax still applies to every month the excess was in the account, even months before you withdrew.
Form RC243, with Schedule A (Excess TFSA Amounts), calculates the 1% tax on your highest excess amount for each month. It's generally due by June 30 of the following year — so an overcontribution in 2026 means filing RC243 by June 30, 2027. Filing late on top of the excess tax can bring additional penalties and interest.
Two traps to avoid:
- Withdrawing does not restore your room. A withdrawal of the excess doesn't create new contribution room for that year — the CRA calls this the "qualifying portion" of a withdrawal. If you re-contribute the same money, you're over again.
- Relief is possible but not automatic. The CRA can waive or cancel the tax if it arose from a reasonable error and you withdrew the excess without delay — but you have to ask, in writing, with evidence.
Frequently asked questions
I got the education letter but no excess shows in my CRA account. What gives?
Your CRA My Account figures lag — they don't include the current year and rely on issuer reports filed by end of February. Track your own contributions and withdrawals against your available room; don't rely on the CRA's number being current.
I moved money between two TFSAs at different banks. Why is that an overcontribution?
Because you withdrew and re-contributed instead of doing a direct transfer. Direct institution-to-institution transfers (qualifying transfers) don't count as contributions. A manual withdrawal-and-redeposit uses up room — and if you had no room, it creates an excess.
Can I just ignore a small excess?
No. There is no minimum threshold and no grace buffer — unlike RRSPs, which allow a $2,000 lifetime cushion, TFSAs have none. A $500 excess for six months still costs 1% × $500 × 6 = $30, plus the filing obligation.
Sources
- https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/tax-free-savings-account/tax-payable-on-tfsas/tfsa-excess-amount-correspondence-explained.html
- https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/tax-free-savings-account/contributing/overcontribute.html
- RC243-SCH-A, Schedule A – Excess TFSA Amounts: http://www.canada.ca/content/dam/cra-arc/formspubs/pbg/rc243-sch-a/rc243-sch-a-25e.pdf
- https://www.investmentexecutive.com/news/industry/confusion-lingers-over-tfsas/