Unlocking Legal Jargon: How an AI Legalese Decoder Can Simplify Complex Terms
- May 13, 2024
- Posted by: legaleseblogger
- Category: Related News
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## Discovering a Large Sum in Parents’ Finances
Going through my parents’ finances while preparing to move them into assisted living/care home, I stumbled upon a tax document that revealed a surprising amount of money in a TFSA account. According to the document, there is $834,000 in the account, with monthly deposits totaling $69,500 over the course of a year. The penalty for this overpayment is estimated to be around $51,000.
## Seeking Clarity and Assistance
I am left wondering if my interpretation is correct—could there really be nearly a million dollars in a TFSA, or is there a mistake on the part of the CRA? Is there another explanation that I am overlooking? If it is indeed true, how can I determine which institution is managing this TFSA?
## Utilizing AI Legalese Decoder for Help
In this complex financial situation, AI Legalese Decoder can be a valuable tool to help decipher legal and financial jargon, providing clarity and insight into the terms and conditions governing the TFSA account. By using this AI technology, you can gain a better understanding of the implications of the tax document and make informed decisions regarding your parents’ finances.
## Seeking Transparency for Care and Support
Despite any concerns about inheritance, it is essential to fully comprehend your parents’ financial decisions in order to ensure their well-being and quality of life. By seeking transparency and understanding the details of their financial situation, you can better support them in their transition to assisted living and provide them with the care and comfort they deserve.
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****** just grabbed a
There’s a third option you’re missing.
Your parent overcontributed 69k at some point.
That 69k is subject to a 1% penalty for each month it’s there.
Access their CRA account and you can find a full accounting of contributions and withdrawals as well as the institutions that hold them
I read it as they over contributed $69,500 to their TFSA and have been accruing penalties monthly on it that with interest now total $51,000. And it appears it has been ongoing for at least a couple of years.
The tax on “non resident contributions” being equal to the tax on “over contributions” suggests they have $69,500 total in their TFSA that they are not eligible to have. And have for roughly three years based on the accrued penalties of $35K to day plus $17k with this notice and whatever they’ve accrued since.
Contact a tax lawyer asap. Please do not try to handle this by yourself alone. Judging by your post, you and your parents have no clue about the situation.
Don’t think they have 834k in their Tfsa. That’s just how the CRA calculates the over contribution each year 69.5 x. 12 months). There was no tax on advantage so the money is probably just sitting there uninvested. Unfortunately the over contribution is probably going to cost a big chunk of what they do have in their tfsa. It’s possible your parents misunderstood their notice of assessment RE TFsA room since it’s often inaccurate.
You should see if you can figure out what happened. The cra might be willing to reduce the penalty especially if the money just sat in there doing nothing and your parents were ill or something and unable to focus on tax situation.
A bit off topic: As a non accountant, I will say I have found a lot of compassion with the CRA with penalties. If you are able to present a case of how they were unfit and didn’t invest the money for gain, it wouldn’t surprise me if this could be reduced a lot.
What have your parents said about it? Have they rectified the issue already? Do they still have an outstanding penality? Is there anything on their 2023 NOA that says anything about penalities remaining?
I feel pretty confident that your parents didn’t understand a TFSA, plunked $69.5k in there and left it. So there are pretty good chance that this over contribution hasn’t even been dealt with. Regardless, go ask your parents. If your parents do not have the cognitive ability to answer, then I hope you are the POA and if so, start by calling CRA.
FWIW, I’ve had otherwise healthy and capable people over contribute to their TFSA and be assessed penalties and interest but under taxpayer relief, with the excuse of “I had no idea and once aware immediately rectified the situation “ have all penalties and interest be forgiven.
First step would be to find the accounts and withdraw the over contributions. Then have the tax accountant assist with filing taxpayer relief for the penalties and interest based on cognitive/medical decline. There are no guarantees, but the amounts are high enough it’s worth the ask.
Someone suggested the info was still readable so I delete the pictures. I will crop and re upload.
Have your parents been considered non residents at any point in the past couple years? You mentioned that they haven’t filed their taxes in 20 years, so I imagine that means that they’ve been here at least that long.
The penalty for overcontributing is 1% a month or $695 (12x = $8340). It’s charging that amount twice saying that they overcontributed AND made non resident contributions. I googled it and that seems standard, meaning the actual penalty for non-resident contributions is 2%.
So it seems like either they assumed they had contribution room but miscalculated it due to not being a resident. Or if they were residents, then for whatever reason the CRA has made an error and is calling them non-residents for certain years.
Link for imgur: https://imgur.com/a/mjzr8xp
Cropped photos.
The only correct course of action is for you to contact CRA for clarification, assuming you have PoA. All else is useless speculation.
Can you not just ask your parents?
Are they not residents? If they are residents, you can cut that charge in half.
My feeling is they may have wanted to contribute to an RRSP and contributed to the wrong account.
Get a good accountant. Really good one from a big firm. It will cost money but they’ll know what to do with CRA to help with the penalties etc
Tax of 1% per month on their overcontribution of 69,500.
It’s been going on for multiple years. This bill is just for 1 year.
Tell them to continue ignoring it and do nothing. That way, they can eventually end up with 0$ to their name and need not worry about anything.
What did your parent say when you asked them?
Wow, that sucks that the interest the CRA is charging is now almost equivalent to the overpayment. Best to square it up ASAP, but I’d have serious concerns if this overpayment was done at the direction/advice of an investment advisor.
Perhaps the over contribution was due to it not being split between both parents, maybe you have a case for some leniency in the interest if that’s the case.