PCF TFSA - What are people doing | Tax Free Savings Accounts | Discussion forum

It really depends on what marginal tax bracket you're in, which affects how much tax you pay. If you're in the lowest bracket, it might not make sense to move your money.

I will be moving the balance of by holdings out of PCF shortly, including my RSP cash holdings. PCF used to be the cream of the crop with interest rates (they were at 4.00% when I joined them) but my how the mighty have fallen.

jeremywong said:

You don't even need TFSA to avoid tax. At .75% interest, even on $5000, one year's interest is only $37.50 (in your case, $18.75). If this is all you keep at PCF outside of registered accounts, your interest is tax-free anyway because T5 is not generated for less than $50!

Interest earned in a year that's less than $50 is not tax free. Although it's true that financial institutions don't usually send T5's if the amount is less than $50, the Income Tax Act requires you to report the income. It's possible it might be more difficult for the CRA to track this income, but why break the law to save tax on such a paltry sum?

jeremywong said:

There's a reason why CRA allows banks not to generate T5 for less than $50: CRA couldn't care less about collecting tax on less than $50. Even if CRA finds that you did not report your $37.50 of interest, the worst thing that can happen is they ask you to pay the tax. There is no penalty for such a small amount.

One year, I omitted all my T5s and T3s in my tax return to see what would happen. All CRA did was enter them for me, and ask me to pay the tax. There was no penalty.

Your claim that interest under $50 is "tax free" is completely false. If you want to break the law, that's none of my business, but please stop spreading lies and encouraging others to follow you.

Your conclusion that the CRA does not care about small amounts of money is based on a logical fallacy. Just because they didn't care if you misreported income once does not mean that's always going to be the case. Pulling stupid tricks like that a couple times does not guarantee you'll be prosecuted, or even make it likely. But try doing that year after year and see what happens. By doing it just once you've increased your chances of being audited in the future.

Maybe you've learned your lesson and will not do that anymore. Unfortunately that won't necessarily be the end of the story for you. Maybe one year you'll make a completely honest mistake on your tax return but get audited since you've already been flagged.

And that's why you don't try to swindle the tax man out of paltry sums of money.

I pulled all of my savings out of PCF (including $5000 out of their TFSA I had maxed out since January 1st). I moved it all over to CTFS where it is currently earning 3% (2% rate + 1% promo for 3 months). I also receive a $25 bonus for setting up an automatic transfer into the CTFS account...as long as I transfer a minimum of $25 once a month from another account (until at least the beginning of July).

For shame PCF, for shame...

P.S. If the bank doesn't write me a T5, there is no way I am claiming it.

A long, long time ago when I was a teen making under $50 interest a year and the bank didn't send me a T5 I though it wasn't taxable either.

Who knew.

Thanks to "high interest savings accounts" I get those T5's now.

Mike

I find that you cannot pay bills with CTFS high-interest savings account

nelboski said:

Why in the world would you want to pay bills with a high interest savings account? That's what chequing accounts are for!

Because Canadian chequing accounts charge you service fees of 65 cents for each withdrawal if you do more than 10 a month. Sure, you can get accounts with unlimited transactions if you keep a balance of $2000 or $5000 in your chequing account, but then you lose all the interest you would have generated had you kept that money in your savings account.