T5 for GIC not correct? | Page 2 | Income tax filing | Discussion forum

This is definitely a big hole in the CRA's rules !!! I just go with T5 slips, even though in some years, it would be beneficial for me in terms of taxes to go with interest earned instead of T5 received. And, I'm not sure how CRA checks this if people mix between the two: T5 received and interest earned rules.

I have my fingers crossed, hoping that the first T5 was from a promo gift, contest/draw winnings or other deposits. The scenario we are all thinking could be freaky if many FIs have the same issues. Paying taxes twice is not cool.

jimy said
… but with all of our automated.systems why can't they produce an accurate document matching CRA requirements.i.e. a t5 for each year of a multi year GIC
…

That is what financial institutions are required to do for personal taxpayers: Issue a T5 slip for each anniversary year of a multi-year GIC when the GIC compounds less frequently than annually.

There won't be a T5 slip for the first calendar year as the first anniversary hasn't been reached yet. But, there should be an annual T5 slip starting the second calendar year that contains the first anniversary.

This is what Chapter 8 of the T5 Guide – Return of Investment Income instructs financial institutions to do:

Contracts acquired after 1989
You have to prepare T5 slips each year for all investment contracts acquired after 1989. You have to prepare these slips annually even if you did not pay the interest.

What is an investment contract?
An investment contract is any debt obligation other than those excluded by the definition of investment contract in subsection 12(11) of the Act. For example, a debt obligation that provides for the payment of interest at least annually is not an investment contract because it is excluded by paragraph (i) of the investment contract definition.

A common type of investment contract would be a written agreement with a financial institution where a sum of money is invested for more than one year and the accrued interest on the funds invested is only paid at maturity (when the term of the contract expires).

On the T5 slip, enter the total of all interest accrued to each anniversary day. Do not include any interest you previously reported.
…

The only reason I can see for an individual taxpayer to not receive a T5 slip annually is the slip would be for less than $50. But, that doesn't prevent the financial institution from issuing a T5 slip for under $50 anyways.

good, sounds like its all clear up now and banks are doing what they are supposed to do after all.

My philosophy is since CRA calculates what I owe based on the T5 they receive separately from the FIs, as long as I am reporting the same, it should be fine.

I once asked for a simple adjustment and the CRA personal who "manually" did it ended up double counting a few of my T5s, resulting in a reassessment that I owed $$$ in tax which obviously I didn't. Took it over a year, 4 phone calls, numerous faxes, a 10 page detailed explanation (that showed which T5 they double count and wrong, I am now the expert in forensic accounting as a result, lol.) and then finally got it resolved. Even then have to pay them what they want plus penalty interest upfront while its in dispute (to avoid penalty interest being accumulated).

Long story short, it ain't fun.

I'm just wondering if the method of per year earned interest gives me a tax advantage vs T5 method, can I challenge it even though CRA will base the calculation on T5 ?

As well, the T5 slip method, based on the anniversaries of the GIC, is prescribed by Income Tax Act subsection 12(4) unless the taxpayer is one of the exceptions in 12(3):

Interest income

12 (3) Subject to subsection 12(4.1), in computing the income for a taxation year of a corporation, partnership, unit trust or any trust of which a corporation or a partnership is a beneficiary, there shall be included any interest on a debt obligation (other than interest in respect of an income bond, an income debenture, a small business bond, a small business development bond, a net income stabilization account or an indexed debt obligation) that accrues to it to the end of the year, or becomes receivable or is received by it before the end of the year, to the extent that the interest was not included in computing its income for a preceding taxation year.

Interest from investment contract

12 (4) Subject to subsection (4.1), if in a taxation year a taxpayer (other than a taxpayer to whom subsection (3) applies) holds an interest in, or for civil law a right in, an investment contract on any anniversary day of the contract, there shall be included in computing the taxpayer’s income for the year the interest that accrued to the taxpayer to the end of that day with respect to the investment contract, to the extent that the interest was not otherwise included in computing the taxpayer’s income for the year or any preceding taxation year.

An individual taxpayer would have to find a GIC that pays or compounds interest more frequently, like monthly, to report interest earlier than on each anniversary day.