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7 Things to Do in the Summer for College Students With No Job

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Are you in college and feeling like you’re stuck in limbo because of the COVID-19 pandemic?

Hiring freezes, canceled internships and stay-at-home orders have thrown a lot of summer 2020 plans out the window.

But you can still make the most of your summer break to further your education, work experience and skill-building — it’ll just take a little flexibility and creativity.

Here are seven productive things to do in the summer for college kids.

7 Ways to Make the Most of Summer Without a Job

Here are some creative ways to make good use of your summer break if a regular job or internship is off the table.

1. Take Free Online Classes

Going to class might not be your first choice for summer break, but this is a smart time to develop valuable career skills.

MOOCs, massive open online courses, let you take classes from real universities — even heavy hitters like MIT and Harvard — online for free.

Here are five important soft skills you can learn through free online courses this summer:

  • Emotional intelligence
  • Multicultural literacy
  • Storytelling and communication
  • Personal branding and social media literacy
  • A new language

Pick them up through these free MOOCs.

You can bone up on hard skills through online tutorials, too. These skills will come in handy in any field:

  • How to use a spreadsheet
  • How to use G-Suite apps
  • How to use WordPress
  • How to use social media
  • How to edit video and audio
  • How to edit photos and graphics
  • How to administer first aid
  • How to analyze data

Study up through these free tutorials.

2. Earn Credits for Free

The College Level Examination Program lets you earn college credit in basic subjects like math and history by taking an exam.

CLEP exams cost $89 to take, but you can get fees covered through Modern States’ Freshman Year for Free program. Enroll for free online courses and tutoring through the program, and it covers your CLEP exam fee (for the first 10,000 students).

Test centers live on college campuses and other locations around the country, and you have to show up in person for an exam. You can generally schedule your exam any time the campus is open for classes (including summer semesters).

Test centers will be closed if their host campuses are closed, but keep an eye out for the CLEP coronavirus updates for the possibility of remote testing, and contact your preferred test center for information about availability.

3. Apply for a Project Grant

Use the summer to work on your own creative project! It could make good resume fodder — especially if you win a grant to fund it.

Check out these resources to find grants for artists:

If you need emergency funding because of lost work due to the coronavirus, peruse our lists of emergency grants for artists and financial aid for writers.

Even if you don’t win a grant, completing a project that will impress a prospective employer could pay off big time in the future.

4. Volunteer Virtually

If a lost internship or job opportunity leaves a hole in your summer schedule, consider filling it with volunteer work. The experience looks good on your resume, and volunteering can be just as valuable as job experience for building useful career skills and networking.

The same way companies are shifting to remote work in response to the pandemic, lots of nonprofit organizations are moving volunteer work online, too. With increased social need and a presidential election this year, service, advocacy and political organizations need help all over the country.

Find volunteer opportunities online and in your area through Idealist.

5. Freelance in a Related Field

Tons of work that might be relevant to your future career could be available online as freelance gigs.

Freelance writing is especially in demand and it provides the opportunity to start working without a degree, experience or particular expertise (though each of these could earn you more money down the line).

Start by looking for freelance blogging jobs, which usually have a lower barrier to entry. Once you get a few published pieces under your belt, try pitching a story to a higher-paying outlet.

Not a writer? Try your hand at being a virtual assistant, graphic designer or one of these more unusual freelance jobs:

  • Virtual recruiter
  • PowerPoint presentation designer
  • Children’s book illustrator
  • Genealogist
  • Greeting card writer

If you graduated this month without work or internship experience, freelancing could be a way to earn money while beefing up your resume before applying for full-time jobs.

“Employers don’t really hire for potential — you’ve got to be able to show how you’ve applied that potential in some way,” says Alison Green at Ask a Manager. “Even with entry-level jobs, you’re going to be up against other entry-level candidates who have some amount of experience.”

6. Find Online Jobs

Were you counting on a summer job in the now-unpredictable service industry to pay rent or save up for next semester’s tuition? Take your job search online.

Search for full-time and part-time work-from-home jobs through The Penny Hoarder’s vetted WFH jobs portal.

Or, put your talents to work toward creative side gigs. Here are some side gigs you can do online while social distancing:

  • Join video game tournaments
  • Work for a political or advocacy campaign
  • Perform music, comedy, magic or anything else online
  • Be a bookkeeper
  • Do online research through Wonder
  • Be a transcriptionist
  • Be an online tutor

Check out these online jobs for college students that pay at least $15 an hour.

7. Apply for College Scholarships

A man does coursework on his laptop at home.

Another option for covering next semester’s tuition: Apply for scholarships.

Several scholarships require you to submit an essay with your application, so summer break — when you don’t have other schoolwork — is a great time to focus on them.

Search for scholarships from your college, county, municipality or state; from organizations that support people of your race, ethnicity, gender or other demographics; or from organizations that support your field or interests.

You can also peruse our list of 100 wacky scholarships for things you never would have thought of.

Don’t Let Coronavirus Cancel Your Summer

A lot of big things have been canceled because of the COVID-19, and that’s a major bummer.

But you don’t have to accept the setback to your career preparation. Get creative to make the most of your summer break and keep your education and development moving forward — even if you can’t leave home.

Dana Sitar (@danasitar) has been writing and editing since 2011, covering personal finance, careers and digital media.

This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. The Inc. 5000 ranked The Penny Hoarder as the fastest-growing private media company in the U.S. in 2017.



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PenFed Checking And Savings Review: Full Service And Solid Rates

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If you’ve been looking to join a credit union instead of a bank or want to add a credit union account for your checking and savings, PenFed is worth checking out. 

While they don’t have the highest checking and savings APYs, they are reasonable and competitive for a full-service credit union. In fact, PenFed made our list of the top 5 credit unions nationwide of 2020.

PenFed’s mobile app allows you to do all of your banking online or on the go through their mobile app, no matter where you are in the U.S. and even some locations outside of the U.S. In this article, we’ll review PenFed’s checking and savings products.


PenFed Logo

Quick Summary

  • Competive interest rates
  • Large nationwide ATM network
  • Minimum balance required to avoid checking account fees

PenFed Checking And Savings Details

Product Name

PenFed Credit Union

Account Types

Checking, Savings, Money Market, Certificates

APY

0.05% to 0.90% APY

Min Deposit

$5

Promotions

None

Who Is PenFed?

Pentagon Federal Credit Union is a full-service credit union. They were created in 1935 and have $25 billion in assets. PenFed is headquartered in McLean, Virginia. They used to restrict membership to a relationship with the military or federal government but have recently opened up to everyone. 

PenFed services all 50 states, including the District of Columbia, Guam, Puerto Rico, and Okinawa (Japan). They are federally insured by NCUA and are an Equal Opportunity Lender. In addition to PenFed checking and savings accounts, members can also access home, car, credit card, and student loan products.

See our review of PendFed’s student loan refinancing product.

What Do They Offer?

PenFed has one checking account and four savings products. They have a network of 68,000+ ATMs. You can bank online or through their mobile app. PenFed has nearly 50 branches across 16 states and the District of Columbia, Guam, Puerto Rico, and Okinawa.

The PenFed website shows its accounts earn interest (APY) and dividends. The terminology can make it sound as though you get the APY plus dividends. That isn’t the case. Dividends are simply being used interchangeably with interest (APY).

Access America Checking Account

You’ll need to deposit $25 to open a checking account with PenFed. PenFed checking accounts do earn a little interest — 0.20% to 0.50% depending on account size as shown below.

  • 0.20% APY on a daily balance of less than $20K
  • 0.50% APY on a daily balance of $20K or more up to $50K

In addition to the listed APYs, you can also earn dividends with a monthly direct deposit of $500 or more. As well, to avoid the $10 monthly fee, you’ll need a daily balance or monthly direct deposit of $500 or more. Overdraft protection is available but is subject to approval.

Premium Online Savings Account

The Premium Online Savings Account pays 0.90% APY on balances up to $250,000 and only requires a $5 deposit. There are no monthly fees. However, there also is no ATM access.

Be aware that savings accounts have more restrictions than checking accounts. Due to federal law, you can only withdraw money from your account up to six times per month. You’re allowed up to $10,000 per day in deposits and a total of $50,000 for the month.

Regular Savings Account

The Regular Savings Account pays only 0.05% APY on all balances. But in exchange for giving up that interest, you gain ATM access. However, if you can get by with transferring money to your checking account before making a withdrawal, the Premium Savings Account is clearly the way to go.

Money Market Savings Account

The Money Market Savings Account requires $25 to open and doesn’t lose ATM access. There are no monthly fees and you get free checks upon request. The account pays interest through several tiers that are dependent on your balance:

  • 0.05% APY — $10,000 or less
  • 0.10% APY — between $10,000 and $99,999
  • 0.15% APY — $100,000 or more

See how this compares to the top money market accounts here >>

Money Market Certificates

You’ve probably heard of a certificate of deposit (CD). Credit unions call these simply “certificates,” but they are basically the same. 

PenFed has several certificates to choose from. All require a $1,000 deposit to open. Just like a CD, your money must remain in the certificate until maturity or you’ll pay an early withdrawal penalty. Dividends are compounded daily and paid monthly.

The following certificates are available:

  • 6 Month — 0.40%
  • 12 Month — 0.70%
  • 15 Month — 0.70%
  • 18 Month — 0.70%
  • 2 Year — 0.75%
  • 3 Year — 0.80%
  • 4 Year — 0.85%
  • 5 Year — 1.00%
  • 7 Year — 1.05%

Mobile App

The mobile app for PenFed checking and savings includes all of the features you’d expect from full-service credit unions. You get instant check deposits, bill pay, ability to send money to almost anyone, account management, and the ability to transfer funds between your PenFed accounts.

Are There Any Fees?

The majority of PenFed’s accounts don’t come with fees. However, its Access America Checking Account has a $10 month fee if certain minimums are not met. To avoid the fee, you’ll need to keep a minimum balance of $500 or set up a $500 monthly direct deposit.

How Do I Open An Account?

You can visit Penfed.org or a local branch if you have one near you to apply for membership. If approved, you’ll need to deposit at least $5 to open an account.

Is My Money Safe?

Yes, money deposited with PenFed is federally insured by the NCUA. Like FDIC insurance for banks, NCAU insurance protects up to $250,000 of credit union member deposits per account.

Is It Worth It?

If you’re looking to open a checking or savings account with a credit union, PenFed is a full-service credit union that pays up to 0.50% on checking account deposits and up to 1.00% on savings. It has about 50 branches in 13 states, plus a few outside of the U.S. and includes NCUA protection. For those reasons, PenFed checking and savings is certainly worth considering.

But if you won’t be able to meet the requirements for waiving PenFed’s monthly checking account fees, you might want to look at these free checking accounts instead. And if you’re comfortable with managing your checking or savings accounts with minimal support, you might be able to earn higher rates with an online bank. These are our favorite online banks for 2020.

PenFed Checking And Savings Features

Account Types

Checking, Savings, Money Market, Certificates

Minimum Deposit

  • Checking: $25
  • Savings: $5
  • Money Market: $25

APY

Checking

  • 0.20% APY on a daily balance of less than $20K
  • 0.50% APY on a daily balance of $20K or more up to $50K

Regular Savings: 0.05% APY

Premium Online Savings: 1.00% APY

Money Market Savings

  • 0.05% APY — $10,000 or less
  • 0.10% APY — between $10,000 and $99,999
  • 0.15% APY — $100,000 or more

Certificates

  • 6 Month — 0.40%
  • 12 Month — 0.70%
  • 15 Month — 0.70%
  • 18 Month — 0.70%
  • 2 Year — 0.75%
  • 3 Year — 0.80%
  • 4 Year — 0.85%
  • 5 Year — 1.00%
  • 7 Year — 1.05%

Maintenance Fees

  • Checking: $10 (waived with $500 minimum balance or $500 monthly direct deposit
  • Savings: None
  • Money market: None
  • Certificates: None

Branches

~50 across 13 states

ATM Availability

68,000+ fee-free ATM network

Customer Service Number

1-800-247-5626

Customer Service Hours

  • Mon-Fri: 7:00 am-11:00 pm (EST)
  • Saturday: 8:00 am-1:00 pm (EST) Saturday
  • Sunday: 9:00 am-5:30 pm (EST)

Mobile App Availability

iOS and Android

Bill Pay

Yes

NCUA Charter Number

00227

Promotions

None

The post PenFed Checking And Savings Review: Full Service And Solid Rates appeared first on The College Investor.



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The Sweet Spot

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“Success can get you to the top of a beautiful cliff,

but then propel you right over the edge of it.”

As a Mustachian, there’s a good chance that you are a bit of an overachiever. 

Maybe you fought hard to get exceptional grades in school, or perhaps you have always dominated in your career or your Ultramarathon habit or your hobbies – or maybe all of the above. 

In the big picture, this usually leads to having a “successful” life, because of this basic math:

Traditional Success
 =
How much work you do
x
How much society happens to value your work

The Nitty Gritty of Traditional Success

Now, lest the Internet Privilege Police head straight to Twitter to start writing out citations, Traditional Success is not a measure of your worthiness as a human being. We’re just talking about the old-fashioned, Smiling 1950s Man definition of success.

 And since we’re all scientists here, we could break the “Work” side of it down a bit further:

And thus, you could say that on average, doing more stuff produces more traditional success. 

But then what?

This is the point where a lot of  smart, driven, born-lucky people drive themselves up the Winding Road of Challenge and then right off the edge of the Cliff of Success. 

If you’re still on the way up, or stuck at the bottom, it is difficult to even imagine the idea of “too much success”. But it’s a real thing, and it happens much more quickly than the modern overachiever would like to admit. Observe the following cautionary tale:

Diana is the director of engineering in a Silicon Valley tech startup. The work is intense, but they are almost over the hump – the company went public last month, and she owns shares that are worth over $10 million at today’s share price. They will vest over the next five years, so she just needs to grind this out and then she will be set for life.

Sounds great, right?

Except this is Diana’s third smashing success. She was already set for life after the second company was acquired, and even before that, her first decade as a rising star at a large company had already left her with over $2 million of investments and a paid-off house in hella expensive Cupertino, California. She had more than enough to retire, twenty years ago!

To many people who are less fortunate, the present situation would still sound like great fortune, and in some ways, it is. Becoming a Director of Engineering is (usually) far better than a punch in the face.

But Diana is now 52 years old, with a collection of increasingly severe back and neck problems and a few medical prescriptions piling up. She has two grown children in their twenties, but wishes she had been able to spend more time with them as they grew up. She has all the money in the world, but still almost no free time, and this next five years is starting to look like an eternity.

What happened here?

Diana is in good company, because many of our hardest-working people fall into this same trap. They have the talent and the great work habits figured out, but they are still missing one last concept – the idea of the sweet spot.

Fig. 1: What is the ideal length of a high-end career?

Diana could have stopped after the first company, or the second, but her career success took on a momentum of its own, so she kept doubling down without stopping to consider why she was doing it – and what she was giving up in exchange.

Once you learn to see the phenomenon of the sweet spot, you will start noticing it everywhere. And it is an amazingly useful thing to start watching and fine-tuning to get the most out of your own life.

Fig.2: What is the ideal amount of Anything?

The Sweet Spot of Physical Training

When a non-runner starts running, they will see immediate benefits. In the process of going from being unable to jog across a parking lot, to being able to easily jog a brisk mile, your entire body will transform for the better. Muscles and bones get stronger, heart and lungs expand and reach out to give your body a healthy embrace, brain functioning and mood and hormones smooth out and normalize. 

Training your way up to become a two mile runner still brings great benefits – just slightly smaller. The fifth through twentieth mile turn you into a hyper efficient machine, but some people start seeing joint injuries as they rise through the ranks.

And by the time you reach the fringe world of 100-mile runners, serious injuries and surgeries are completely normal – as well as unexpected organ failures in otherwise young, healthy people. The sweet spot for daily running for maximum health is somewhere the middle.

All around us, seemingly unrelated things follow this same pattern, from career work to physical exertion to parenting strategy.

Fame and Fortune – be careful what you wish for

Fame definitely has a sweet spot. Building up a good reputation in your community can open the door to better friendships, jobs, relationships, and more fun in general.

But as that reputation expands outwards to become fame, you get the “reward” of constant coverage in gossip magazines and waking up to find photographers and news reporters on your front lawn. At the extreme end, you need to mobilize a team of armored vehicles and line your route with snipers every time you leave your well-guarded compound.

Even money, our humble and ever-willing servant is subject to this phenomenon. It certainly helps us meet our basic needs, but there is a certain point at which Mo Money can become Mo Problems. 

The first bit of monetary surplus can be fun as you can afford a nice house and good food. Then the next chunk seems fun but also causes distractions as you rack up second and third houses and ever-more elaborate possessions and vacations that take a lot of energy to keep track of.

And from there it goes downhill as tabloids start keeping track of your wealth and scrutinizing your choices, hundreds of people mail in pleas for your generosity, and you end up with a full-time job just making sure that the surplus goes to good use. This life arrangement can still be enjoyable for some people, but I would definitely not wish it upon myself.

On and on this pattern goes. A curve with a sweet spot in the middle. The optimal amount of calories to consume in a day. The volume at which you will enjoy your music most. The right brightness of light to illuminate a room. The number of friends with whom you can have a meaningful relationship.

 Why does it occur in so many places? I believe it is because this is how our brains are wired in the first place

Humans are a ridiculously adaptable creature, but we do still come with limits.

And when you respect those limits and fine-tune your life within the sweet spot for all of the main pillars for happy living, you end up with the best possible chance at living a happy, prosperous life.


A Mid-Roll Advertisement:

Interest rates are still at WTF-low levels, so if you haven’t already done so, I recommend checking your current home mortgage and student loan rates. Either at your local credit union, or online via a service like Credible.

Click Here to open that up in a new tab, and keep reading.

Note: This is an affiliate link, to learn why I use these even when I am supposedly retired, read this.


The Curse Of the Overachievers – Revisited

So now you see the problem – overachievers like us tend to get really good at a few things like a career or an athletic pursuit often specializing so much that we neglect other things like overall health or personal relationships.

And our society notices and rewards us for the success, which just reinforces the behavior, so we take things to even higher extremes, often without stopping to think about the reason behind it.

Okay, So What Now?

Once you see the pattern of the sweet spot,  it is impossible to un-see it. So it becomes pretty easy to float up and look at your entire life from above, like an outside observer.

And from up there, you can see the areas where you have enough, and places where you may have already gone overboard, and the corresponding things that you have left neglected as the price of that success. 

Over the past year I’ve been looking at my own life from this perspective, coming up with quite a few of my own diagnoses:

Money: enough. Additional windfalls don’t seem to bring me any lasting joy, but I also don’t have so much money that it makes me nervous. It’s enough to feel safe and empowered, and that’s all I need. Meanwhile, giving away money has brought me lasting happiness, without creating a feeling of shortage or regret.

Career Success (blog): It Varies. When I was really working on this MMM job in the mid-2010s, it started to take over too much of my life. Emails, opportunities, travel and public attention all reached levels where I actually started to have less fun. So I tried dialing it back, as any long-term readers will have noticed. And sure enough, life improved. But then I went too far and started feeling a loss from letting this valued hobby slip away. I’ve been trying to get back into the groove, which revealed another problem – detailed at the end of this list.

Friendships: Not Enough. I have found myself not being able to keep up with close friends, and had difficulty making or keeping plans, partly out of  feeling overwhelmed with life details in general. Still, the opportunities abound here in my local community, and the people are wonderful. So I have the opportunity to keep working at this.

Health and Fitness: Enough. Since I was about fourteen years old, eating well and getting a lot of varied exercise has always been a kind of non-negotiable pillar for me. Nothing extreme, but just very consistent. I think this has been paying off as I feel healthy every day and have never had any physical or health problems in these 30+ years since.

Parenting and Kids: Enough (an A+!) Since 2005 I made “being a Dad” my primary goal in life, quitting my career to do so. It’s the only thing I can truly say I have done the best I could at, and I’m really proud of that. But part of this success came from only having one kid – both of us parents knew we couldn’t handle any more, given the overall conditions of life back then. So for us, the sweet spot was One Child – and absolutely no regrets in that department.

Personal Projects and Daily Habits: Not Enough. I get great satisfaction from working on challenging things and making progress. But far too often, I just can’t get it together and I squander entire days on accidental distractions. Planning to go out for a day of work can lead to searching for lost sunglasses which can lead to finding a lost to-do list which can lead to opening the computer to look something up and several hours disappearing. On and on these tangents can go, often leading to me not getting my primary, happiness-creating goals for the day accomplished. 

I discovered that I have a pretty severe and textbook case of Adult Attention Deficit Disorder, which gets magnified if there are any sources of stress in my life. So I’m working on that (keeping stress down and also targeting habits, diet, exercise and even trying some medication), which will hopefully improve all other areas of life as well.

What am I missing? I’m still working on thinking it all through, so this list will surely grow.

Your Turn

Your life surely has a completely different array of surpluses, shortages and sweet spots than mine. Your assignment is therefore to write them all out tonight, and see where you stand in each area, and decide what to change. Many of the changes are quite easy to make, and yet the results are nothing short of life-changing.

In the comments: what are your own areas of surplus and shortage? And what’s your plan to help restore balance to your life?



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Woman in TFSA overcontribution fight with CRA has penalties cut from $17,000 to just $300

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While most of us use our TFSAs as general purpose, tax-free savings or investment vehicles, the

Canada Revenue Agency has been cracking down

on perceived misuse of the accounts by assessing some taxpayers with an overcontribution tax, and others

for falling afoul of the “advantage rules” for registered plans

. Two separate tax cases, out last month, dealt with TFSA penalty taxes.

Non-resident TFSA contributions

The first case involved TFSA overcontributions. If you overcontribute, the penalty tax is one per cent per month for each month your TFSA is in an overcontribution position. But there’s a separate, additional penalty tax of one per cent per month if a non-resident contributes to their TFSA, which is what happened in the first case.

In August 2006, the taxpayer left Canada to begin her medical studies in the U.K. While in the U.K. as a student, and, on the advice her Canadian investment adviser, she made contributions to her TFSA in 2009 ($5,000), 2010 ($1,500) and 2012 ($494). She completed her studies in June 2011 and then commenced two years of residency training in family medicine. In November 2012, she registered with the Canadian Residency Matching Service as a fully licensed U.K. doctor, to obtain a residency position in Canada. Finally, in April 2016, she obtained a residency position at a Vancouver hospital and in June 2016, returned back to Canada.

Much to her surprise, in 2018 the taxpayer received Notices of Reassessment from the CRA for 2009 to 2016, assessing her a total of $17,006 of TFSA penalty tax and arrears interest, asserting that she was a non-resident of Canada when she contributed to her TFSA. Indeed, to be able to contribute to a TFSA (and to accumulate the annual TFSA contribution room), you must be a resident of Canada for tax purposes.

An individual’s residency status is determined on a case-by-case basis, taking into account many factors. The most important consideration is whether or not the individual maintains residential ties with Canada. Significant residential ties to Canada include: a home in Canada, a spouse or common-law partner in Canada and dependants in Canada. Secondary residential ties include: personal property, such as a car or furniture, in Canada; social ties in Canada, such as memberships in Canadian recreational or religious organizations; economic ties in Canada, such as Canadian bank accounts or credit cards; a Canadian driver’s license, a Canadian passport, and provincial health insurance.

The taxpayer argued that during the period that she was in the UK, she maintained a room in her parents’ home and always regarded the space in her parents’ home as her permanent home. She kept many of her possessions there until August 2016, when she moved to Vancouver.

While studying in the U.K., she kept strong secondary ties to Canada, including funding her medical school fees and expenses with annual loans from a student line of credit from a Canadian bank, as well as through various federal and Ontario student loan programs. She retained and renewed her Canadian passport, and obtained Canadian citizenship for her two daughters who were born abroad. She kept and renewed her Ontario Driver’s licence, her Canadian bank accounts and credit cards, and maintained her Ontario Health Insurance as an overseas student. She continued to be listed as an occasional driver on her parents’ vehicle insurance and returned to Canada nearly every year from 2006 to 2012 to maintain her ties to Canada. Lastly, she filed Canadian income-tax returns as a resident of Canada that were always assessed as filed.

In other words, although the taxpayer was physically absent from Canada during her years abroad, she argued that she maintained significant ties to Canada during her period of her absence and “intended to return to Canada upon completion of her medical studies and has, in fact, returned to Canada.”

In a consent to judgment issued last month, the CRA conceded that the taxpayer was a resident of Canada until June 30, 2011. This was a negotiated date that was selected by the CRA, as it was the date the taxpayer had completed her medical degree and could have returned to Canada, in theory, to complete her residency/licensing training. The taxpayer became a non-resident on July 1, 2011 and resumed Canadian residence on June 6, 2016, when she began her medical residency position in Canada.

The result, therefore, was that only the 2012 TFSA contribution of $494 was subject to non-resident penalty tax and interest, which totalled approximately $300, a far cry from the initial TFSA reassessments totaling over $17,000.

 

Advantage rules 100 per cent penalty tax

The second recent case involving TFSA penalty tax was at the Federal Court of Appeal and concerned the

“advantage rules,” which are a series of anti-avoidance rules

in the

Income Tax Act

designed to prevent abuse and manipulation of all registered plans, including TFSAs. If you find yourself offside these rules, you could face a 100 per cent penalty tax on the fair market value of any “advantage” that you receive that is related to a registered plan.

The taxpayer was appealing a 2018 decision of the Tax Court in which he was reassessed nearly $125,000 in penalty tax applicable to the advantage the CRA says he received in connection with the transfer of private company shares to his TFSA.

The taxpayer went to court to challenge the constitutionality of the 100 per cent advantage tax. He argued that since the CRA has the discretion to reduce the 100 per cent advantage tax to zero, Parliament “improperly delegated the rate-setting element of (tax) … to the (CRA)” in contravention of the Constitution Act.”

Not surprisingly, the Tax Court, and now, the appellate court, dismissed the taxpayer’s appeal, concluding that Parliament, via the explicit wording found in the Income Tax Act, “has prescribed the liability for the tax, the persons on whom it is imposed, the conditions on which a person becomes liable for it, and criteria by which the amount of tax can be determined. (It) delegates nothing to the (CRA).”

The Court did find that there was a wider issue to be considered as to whether the CRA’s power granted under the Income Tax Act to reduce or cancel the tax constitutes “an invalid delegation of taxation power to the (CRA).” But, due to a “lack (of) adequate submissions and fully developed reasons from the Tax Court,” the appellate court refused to weigh in, concluding: “We should leave the broader issue for another day.”

Jamie.Golombek@cibc.com

Jamie Golombek, CPA, CA, CFP, CLU, TEP is the Managing Director, Tax & Estate Planning with CIBC Private Wealth Management in Toronto.



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