Many Canadians don’t understand the rules of Tax-Free Savings Accounts, finds a recent survey by online bank ING Direct.

According to the Angus Reid Public Opinion poll commissioned by the bank, 23% of Canadians said their bank was responsible for tracking their TFSA contributions and withdrawals. Another 12% think it’s the responsibility of the government, while 7% said their advisor is responsible for keeping track of TFSA transactions.

The same survey also found Canadians have a vague idea (37%) or don’t understand how the TFSA works (14%), while 13% of Canadians said they don’t know what a TFSA is.

“The Tax-Free Savings Account is an invaluable tool when it comes to saving money for the future, but unfortunately many Canadians are unclear about the rules, which can lead to over-contribution mistakes and frustration for savers,” says Peter Aceto, president and CEO of ING Direct Canada. “Like any registered product, there are certain rules when it comes to investing in a TFSA, but it takes minimal effort to familiarize yourself with the ins and outs of the account.”

Here are some dos and don’ts for your clients to keep in mind when managing their TFSAs:

Do keep track of contributions and withdrawals
One of the benefits of a TFSA is the ability to re-contribute the money withdrawn from an account, though the re-contribution cannot be made until the following year.

Thirty-one per cent of Canadians say they’ve made a withdrawal from their TFSA since they started saving. When making multiple contributions and withdrawals to a TFSA, it’s important to keep transaction records to prevent over contributing to a TFSA and being charged a tax penalty.

Although the Canada Revenue Agency notifies taxpayers of the remaining TFSA contribution limit on their income tax Notice of Assessment, it is an investor’s responsibility to track withdrawals and contributions in order not to exceed the annual limit.

DO manage multiple TFSAs wisely

Over a quarter of Canadians (27%) think investors can only have one TFSA, but Canadians can have multiple TFSAs, with more than one financial institution. Keep in mind the annual contribution limit is $5,000 per year, for all accounts combined, so with multiple TFSAs, it’s even more important to keep detailed records of contributions and withdrawals to prevent exceeding the yearly limit.

DO focus on the “tax-free” part, not just the “savings account”

The term tax-free “savings account” is somewhat of a misnomer since Canadians can hold a variety of investments within a TFSA, including GICs, mutual funds, ETFs, stocks and bonds.

Almost half of Canadians (47%) have TFSA funds invested in a savings account, followed by mutual funds (19%), GICs (13%) and stocks/bonds (10%).

DO understand the tax implications of a TFSA

Over a third of Canadians (35%) said they were unsure whether or not they receive a tax deduction for contributions to a TFSA, while 8% believe they do. Unlike an RRSP, contributions made to a TFSA don’t result in a tax deduction.

One in 10 Canadians believe they have to pay tax when withdrawing funds from a TFSA, while a third of Canadians said they weren’t sure. Contrary to RRSP rules, investors don’t have to pay income tax when they withdraw funds from a TFSA. In addition, TFSA withdrawals don’t affect the ability to qualify for income-based Federal benefits, so Canadians aren’t not penalized for saving in a TFSA.