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Email this8:42 am
December 12, 2009
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Rick said
You managed to to get CC to redeem a GIC early? How you do that...hold the branch managers wife hostage?
LOL, Rick, no. Is that one of your issues with Coast, that is not getting GICs redeemed early? They were very reluctant to at first, but I just emphasized the dollar value of deposits I held with them, how much I valued the relationship, their excellent banking products, and associated services and very much wanted to continue that. I also stressed that since the term deposit was relatively new (~2 months in to a 19-month term), I would be willing to forgo all accrued interest. The Relationship Manager conferred with his branch manager (Coast calls them Manager, Member Services, which is interesting because that's normally what other CUs refer to Assistant Manager branch roles), who agreed to allow the redemption without interest/Coast retaining all interest. 🙂
Cheers,
Doug
8:54 am
October 29, 2017
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Looking at your snippet, it’s called a penalty and not just a withdrawal. My conclusion is that you did receive interest and paid a penalty(bank fee)), which aren’t tax deductible, so the tax slip is correct.
EDIT: since other banks may have done this differently and not paid the interest, it doesn’t mean one way is correct and the other is incorrect, it’s simply different.
8:58 am
December 12, 2009
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Vatox said
It’s simply a CC mistake where the interest never should have been deposited.If you don’t want to ruffle feathers, then just file with the tax slip as is and you are all good because you are below the personal exemption.
You said you wanted to do something about this based on principle, yet you don’t want to get the branch in trouble. It appears that there isn’t a way to get both. Questions may be asked if you try to deduct it, so pick one.
True, but I'd prefer to report the amount reported on my T5. It isn't a branch-specific issue. It appears to be a company-wide problem, which is why I want to get it resolved. I don't think the branch should get in trouble, but I fear that, depending on the level I raise it to, that level may forward my complaint to the branch, thinking it was their error when it wasn't. They were just following what their system does and the their policies specify, which are the problems that need correcting.
Cheers,
Doug
9:00 am
December 12, 2009
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Vatox said
Looking at your snippet, it’s called a penalty and not just a withdrawal. My conclusion is that you did receive interest and paid a penalty(bank fee)), which aren’t tax deductible, so the tax slip is correct.
But that's the problem - it's not a bank fee. We agreed that I would just forgo the interest. The branch didn't make the error, though...the error is in how their system handles accrued but forfeited interest.
We've already established that most other financial institutions do not handle forfeited interest. Their method is flawed and not customer centric. And, I'd still argue, as Norman and Loonie have said, I could still deduct this interest not received.
Think of it this way: when I worked at HSBC, if I improperly credited the wrong person's account number an amount (say $10,000) and immediately debit that same amount ($10,000), can CRA say that that's income that wrong person didn't declare? Can that wrong person say I did not have permission to debit their account for the $10,000 I incorrectly credited and to which they were not entitled? No, in both cases. The same principle applies here.
Cheers,
Doug
9:16 am
October 29, 2017
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Doug said
But that's the problem - it's not a bank fee. We agreed that I would just forgo the interest. The branch didn't make the error, though...the error is in how their system handles accrued but forfeited interest.
Cheers,
Doug
Unless your email states that you were not to be paid interest, the official record shows it as a penalty. Your only recourse is to get in deep with your email records as proof or let it go. You said yourself that it’s what you agreed to, so you either prove it or you don’t. That’s it.
You can’t get both, either your correspondence with CC proves you weren’t to receive interest or the tax receipt is correct. You must choose one of these two options. No matter what avenue you take to filing your taxes, it leads to one of those two options. Unless the CRA doesn’t question the tax deduction, which is a gamble.
9:21 am
February 17, 2013
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Doug said
LOL, Rick, no. Is that one of your issues with Coast, that is not getting GICs redeemed early? They were very reluctant to at first, but I just emphasized the dollar value of deposits I held with them, how much I valued the relationship, their excellent banking products, and associated services and very much wanted to continue that. I also stressed that since the term deposit was relatively new (~2 months in to a 19-month term), I would be willing to forgo all accrued interest. The Relationship Manager conferred with his branch manager (Coast calls them Manager, Member Services, which is interesting because that's normally what other CUs refer to Assistant Manager branch roles), who agreed to allow the redemption without interest/Coast retaining all interest. 🙂
Cheers,
Doug
My issue with CC was how little they valued our relationship. That and, other than the occasional promo, their rates and customer service suck. They gave my daughter a great rate on her overdraft/LoC, and she had very little in the way of savings with them. When I asked for the same rate, and I had well into 6 figures with them and had been with them for a decade, they refused. No reason given other then they can't. Used to have our savings, TFSAs, RSPs, mutual funds, mortgage and D2D banking. Now I have a chequing account and a 4% GIC with them and that's it. Use them as a hub to connect to accounts I don't want to have access to my main FI.
9:21 am
April 6, 2013
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Doug said
But that's semantics, really. It's accrued interest that I never received. The fact it went in and out of my bank account immediately (Figure 1) should be immaterial. Effectively, at best, I'm being asked to pay the tax on the interest income (revenue) Coast is retaining and thus not paying tax on. At worst, both I and Coast are paying tax on the same dollars of income (double taxation). 😉
…
Such subtleties do matter. There is a famous Bronfman Trust tax court case that came about because of such subtleties.
Had the Bronfman Trust sold the investments first, paid the proceeds to the beneficiary, borrowed the money, and repurchased the investments, Revenue Canada would not have challenged the trust's attempt to deduct the interest as carrying charges for investment.
Instead, the trust borrowed the money, paid it to the beneficiary, and then tried to argue that, because the net effect was the same, the loan interest is deductible as carrying charges for investment.
Not only did the trust lose the case in Tax Court, the judge also blasted Revenue Canada for allowing loan interest to be deductible at all in such "sham" situations in error. 
The accrued interest became interest paid in your case. Your transaction records clearly show "Interest Paid" of $77.67. The net does not matter.
If I'm paid $20 of interest and I am charged a $24 interest penalty, I need to report $20 of interest received and a deduction for the $24 penalty paid.
There's no double taxation. Yes, Coast gets to deduct the $77.67 interest paid to you. But, Coast needs to report the $77.67 it charged you as income. You report the $77.67 interest you were paid. You also get an offsetting $77.67 deduction, under 20(21), for the interest penalty your records clearly show you paid.
It is similar to when I buy marketable bonds the week before a semi-annual payment. I pay the former owner accrued interest for the 5+ months from the last interest payment. I deduct that payment as carrying charges under subsection 20(14)(b). When I receive the six months of interest from the bond issuer in a week, I report the full six months of interest.
9:28 am
December 12, 2009
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Maybe so, Norman, but the fact is...if Tangerine, Scotia, and HSBC are within the bounds of tax law and tax reporting by simply withholding (i.e., keeping) the accrued interest, which is income to them, why would Coast (or any other FIs) do this when they don't need to? That's not customer-centric. 
Also, we don't know, from those transactions, that Coast has even credited a non-interest revenue (service charge) account for the $77.67. In all likelihood, this is just how they handle withheld interest in their banking system, in which case, it's simply forfeited interest that passes first thru the client's bank account. Not also the posting order and times such that the "interest penalty" posts before the "interest paid". Effectively, I was charged the penalty before "receiving" this interest.
Cheers,
Doug
9:32 am
October 29, 2017
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Lol, if it’s an incorrectly credited account transaction, then you still have to prove it because the official account statements say otherwise. You still have only the two options unless you gamble that the CRA won’t question the deduction. It is quite possible they will let it slide, as the $77 isn’t enough to worry about. The CRA has hundreds of billions of unreported income, from the ultra rich, to be concerned with.
9:39 am
December 12, 2009
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Vatox said
Lol, if it’s an incorrectly credited account transaction, then you still have to prove it because the official account statements say otherwise. You still have only the two options unless you gamble that the CRA won’t question the deduction. It is quite possible they will let it slide, as the $77 isn’t enough to worry about. The CRA has hundreds of billions of unreported income, from the ultra rich, to be concerned with.
I refuse to let this get to that stage. One or another, I intend to either (a) recover the "interest penalty" from Coast, whether as a transaction reversal or a customer goodwill gesture of the same amount, or (b) have my T5 amended.
Fundamentally, though, I think Coast needs to change this non-standard practice.
Cheers,
Doug
9:39 am
October 29, 2017
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Using other FI’s methods as an excuse won’t help you.
Yes go with the T5 amendment.
9:44 am
December 12, 2009
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Vatox said
Using other FI’s methods as an excuse won’t help you.Yes go with the T5 amendment.
Why not? It's a powerful argument, and one the Contact Centre agents with whom I spoke totally see where I'm coming from. 🙂
Cheers,
Doug
9:48 am
October 29, 2017
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Why not? It's a powerful argument, and one the Contact Centre agents with whom I spoke totally see where I'm coming from. 🙂
Cheers,
Doug
I mean with the CRA. By all means, use it with CC.
9:58 am
April 6, 2013
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Doug said
Maybe so, Norman, but the fact is...if Tangerine, Scotia, and HSBC are within the bounds of tax law and tax reporting by simply withholding (i.e., keeping) the accrued interest, which is income to them, why would Coast (or any other FIs) do this when they don't need to? That's not customer-centric.
Sometimes a decision is made and it wasn't the best.
Perhaps, the other banks used to do the same and got lots of queries the following February when the T5 slips were sent out. Branches complained.
To rid the cost of those queries, someone investigated and found out they could just cancel the accrued interest or pay the accrued interest directly to the bank. Less staff time consumed than paying it out to the customer, charging the customer an offsetting penalty, and having to explain next February to the annoyed customer how to do a subsection 20(21) deduction.
10:10 am
December 12, 2009
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Norman1 said
Sometimes a decision is made and it wasn't the best.Perhaps, the other banks used to do the same and got lots of queries the following February when the T5 slips were sent out. Branches complained.
To rid the cost of those queries, someone investigated and found out they could just cancel the accrued interest or pay the accrued interest directly to the bank. Less staff time consumed than paying it out to the customer, charging the customer an offsetting penalty, and having to explain next February to the annoyed customer how to do a subsection 20(21) deduction.
Yes, and at the end of the day, the net result is the same. Coast still gets to keep the revenue - it just may be classified as interest income instead of non-interest revenue.
That's my reason for wanting to get this fixed.
I personally think, if they don't want to amend my T5, then just let me keep the interest (i.e., reverse the penalty) and then we can sort my suggestion on improving things vis-a-vis policies moving forward.
Cheers,
Doug
4:05 pm
October 21, 2013
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Norman1 said
Loonie said
…
3. The problem sort of reminds me of some principles that seem to be in effect regarding HST. I can't recall the exact circumstances, but sometimes merchants seem to have the right to tax you on an amount higher than what you actually paid out due to some understanding of sales or discounts or whatever. I've never understood this. The point is only that numbers aren't always what they seem, apparently.…
That's the store discount versus manufacturer coupon issue.
A store discount is consider a reduction in shelf price. So, HST is charged on the reduced price.
A manufacturer coupon is considered to be consumer rebate and not a reduction in shelf price. So, HST is charged on the original shelf price.
Some coupons (especially those for full price or larger amounts) will specifically include tax.
But, yes, this must be the problem I often encounter.
4:14 pm
October 21, 2013
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Doug said
LOL, Rick, no. Is that one of your issues with Coast, that is not getting GICs redeemed early? They were very reluctant to at first, but I just emphasized the dollar value of deposits I held with them, how much I valued the relationship, their excellent banking products, and associated services and very much wanted to continue that. I also stressed that since the term deposit was relatively new (~2 months in to a 19-month term), I would be willing to forgo all accrued interest. The Relationship Manager conferred with his branch manager (Coast calls them Manager, Member Services, which is interesting because that's normally what other CUs refer to Assistant Manager branch roles), who agreed to allow the redemption without interest/Coast retaining all interest. 🙂
Cheers,
Doug
Good lord! You actually said all that?? I'd be upchucking my breakies after that encounter! There isn't any FI that I feel THAT warmly about - and I'm really poor at faking it!
4:21 pm
December 12, 2009
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Loonie said
Good lord! You actually said all that?? I'd be upchucking my breakies after that encounter! There isn't any FI that I feel THAT warmly about - and I'm really poor at faking it!
Are you saying I'm patient, and you would've just said, "Okay, thank you very much, but I'll take my deposit business elsewhere"? 
But to answer your question, yes, more or less, that's what I "said." For clarity, though, I "said" it via e-mail, not in-person. I do most of my GIC renewals and purchases online, where possible, or via e-mail where not.
Cheers,
Doug
4:33 pm
October 21, 2013
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Vatox said
Unless your email states that you were not to be paid interest, the official record shows it as a penalty. Your only recourse is to get in deep with your email records as proof or let it go. You said yourself that it’s what you agreed to, so you either prove it or you don’t. That’s it.
You can’t get both, either your correspondence with CC proves you weren’t to receive interest or the tax receipt is correct. You must choose one of these two options. No matter what avenue you take to filing your taxes, it leads to one of those two options. Unless the CRA doesn’t question the tax deduction, which is a gamble.
I can recall incidents where a bank made a credit in an account and then immediately rescinded it. The only one I can remember any details at all for was in regards to someone who died. There was a deposit from the Federal Govt for one of the pension systems, and then they immediately took it back because the person had died. The amount was certainly not included in the T-slip.
Granted, that was not in the bank's discretion, but it does show a deposit going in and out without tax consequences being triggered. And a government precedent at that!
This may not be an exact parallel but it does show that there's more than one way of handling things. I've had other errors from time to time that were shown this way, which were bank posting errors, but can't remember details now.
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