, On Sunday January 30, 2011, 7:45 pm ESTBy Dean Beeby, The Canadian Press
OTTAWA - Canadians are still confused about the rules for a popular tax shelter heavily promoted by the Tory government and the big banks, a new study suggests.
At least 72,000 Canadians were hit with unexpected tax bills last June after getting notices they had violated a key restriction on Tax-Free Savings Accounts, or TFSAs.
The little-known wrinkle says account holders can put back amounts they withdraw from a TFSA only in the next calendar year. If they do so in the same year, they face a tax hit for their "overcontribution," even though they're only replacing the withdrawn funds.
And a focus-group study last fall found TFSA account-holders remain confused — and most were unable to navigate the Canada Revenue Agency's difficult website to find the proper rules.
"There was very little top-of-mind awareness of rules around the withdrawing and putting money back in within the same calendar year," says the November report by Sage Research Corp., commissioned by the Canada Revenue Agency.
"Overall the results indicate there may be substantial uncertainty and confusion around how withdrawals affect contribution room."
The $40,000 study involved six focus groups gathered late September in Calgary, Toronto and Montreal, more than three months after the controversy first erupted. Every member of each seven-person focus group had previously opened a TFSA account.
Participants were also experienced in web browsing — but were stymied by the revenue agency's own website when asked to locate the rules governing TFSAs. Navigation proved difficult even for Internet veterans.
"Overall, less than half the participants arrived at the correct information page within the time allotted (three to five minutes), and only a small number arrived at this page quickly," says the November report.
"Several participants commented that had the moderator not told them to look for a TFSA guide, they would never have realized a guide is available at the site."
Agency survey shows confusion still reigns over Tax-Free Savings Accounts
