EQBank T5 slip Box 13 for TY2019 includes interest credited on 2020-Jan-1st | Income tax filing | Discussion forum

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EQBank T5 slip Box 13 for TY2019 includes interest credited on 2020-Jan-1st
April 16, 2020
4:26 pm
pcs
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Hi, as per Topic name above ...

I have noticed that the total in Box 13 on my EQBank T5 slip for TY2019 includes an interest amount which was credited to my account on 2020-Jan-1st.

This is different from other banks' practice, where to date I have always seen interest credited Jan 1 of TYn+1 being reported on the T5 slip for TYn+1.

Can anyone comment whether EQ's inclusion of 2020-Jan-1st interest in TY2019 is
(a) acceptable under the various laws and regulations ?
(b) NOT acceptable (therefore a mistake on EQB's part which needs to be corrected before I can file TY2019) ?
(c) a gray area which may (or may not) cause a problem down the road ?

Thanks in advance for any insights.

April 16, 2020
4:55 pm
Doug
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pcs said
Hi, as per Topic name above ...

I have noticed that the total in Box 13 on my EQBank T5 slip for TY2019 includes an interest amount which was credited to my account on 2020-Jan-1st.

This is different from other banks' practice, where to date I have always seen interest credited Jan 1 of TYn+1 being reported on the T5 slip for TYn+1.

Can anyone comment whether EQ's inclusion of 2020-Jan-1st interest in TY2019 is
(a) acceptable under the various laws and regulations ?
(b) NOT acceptable (therefore a mistake on EQB's part which needs to be corrected before I can file TY2019) ?
(c) a gray area which may (or may not) cause a problem down the road ?

Thanks in advance for any insights.  

I noticed that as well, @pcs, and I wasn't happy about it. sf-cool

Coast Capital Savings Federal Credit Union does something similar and includes interest from December of the previous year through November 30 of the current year. In short, December's interest is counted on the January of the following year despite being paid December 31, 2020.

EQ Bank is doing something similar whereby the interest paid in January except it's for the December of the previous year interest.

It's frustrating, I know, but I suspect we have no legal leg to stand on. In short, I suspect it's probably (d) acceptable, but non-standard practice. 🙁

Cheers,
Doug

April 16, 2020
10:42 pm
Loonie
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It's functional for EQ as it allows them to hold onto the interest they owe us for one more day every month. So there is no compounding of interest for twelve days out of every year now. Some well paid accountant probably got a fat bonus for thinking up this devious plan. Multiplied by all the deposits they have, this could be very worth their while financially.

This practice of posting the interest on the first day of the subsequent month actually started with last October's interest. They just didn't bother pointing it out. It is at best a nuisance for those of us who try to keep accurate books.

EQ has never cared much about what WE want them to do. How long have we been waiting for TFSAs and joint accounts now? Years. And they lie and tell us it's coming soon, repeatedly.
EQ is the last place I put my money, only when everything else is a worse option. The other day I went to the bother of removing my last $5.62

There are various kinds of non-standard postings of interest. Steinbach waits until the end of the year, so there is no monthly compounding. Tangerine posts some on the last day of the month and some on the first if there is a promo. Simplii does it at the end of a promo. And so on.

What EQ is now doing may be a new trend, so we should keep an eye on all our savings accounts.

April 17, 2020
9:13 am
pcs
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Thanks for the responses.

Yes, I had noticed that EQ's crediting of interest had "slipped" from last-of-month on Sep-30th to 1st-of-month on Nov-1st. And I'm aware that there are patterns/practices other than "always credit on last-of-month" (e.g. the Simplii and Tangerine promo examples for starters).

My query was/is only about whether a credit on Jan-1st on 2020 should be reported in TY2019. The obvious argument is that the interest was in fact earned during Dec 2019, so reporting it for TY2019 makes sense. However, my previous experience with (e.g.) the Tangerine promos has been that
- regular interest credited Dec-31st is reported on the T5 slip for that year.
- promo interest credited Jan-1st is reported on the T5 slip for the following year.
This is more favourable to us the savers (but may in fact be less technically correct as far as CRA is concerned ? (:^)).

I guess this is just another example of my seeking for consistency in all the wrong places.

April 17, 2020
10:42 am
pcs
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Just FYI, here's the reply from EQ :

To answer your question, No this is not a mistake done by EQ Bank as to why it will not get fixed. The interest from of January 1st 2020 included in your 2019 T5 slip is correct. A typical T5 Slip includes 12 months of interest earnings, January – December. As in your case, even though the interest was paid out on January 1st 2020, this is the interest that you had earned for the month of December 2019. As to why the interest from January 1st 2020 had been included in you 2019 T5 Slip.

April 17, 2020
12:55 pm
Loonie
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The reply doesn't explain why they are holding back the interest for an extra day, although that may not have been the question you asked.

April 18, 2020
3:28 am
cruzinalong
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pcs said
Hi, as per Topic name above ...

I have noticed that the total in Box 13 on my EQBank T5 slip for TY2019 includes an interest amount which was credited to my account on 2020-Jan-1st.

This is different from other banks' practice, where to date I have always seen interest credited Jan 1 of TYn+1 being reported on the T5 slip for TYn+1.

Can anyone comment whether EQ's inclusion of 2020-Jan-1st interest in TY2019 is
(a) acceptable under the various laws and regulations ?
(b) NOT acceptable (therefore a mistake on EQB's part which needs to be corrected before I can file TY2019) ?
(c) a gray area which may (or may not) cause a problem down the road ?

Thanks in advance for any insights.  

It seems each institution has slightly different methods of reporting. I purchased a 5 year GIC JANUARY 1, 2020. I figured the interest would appear on a 2021 slip. Not so. January 1, 2020 + 365 days = December 31, 2020. 2020 is a leap year. Next year I will purchase my 5 year GIC on JANUARY 2, 2021.

I cannot comment on EQ reporting. Each situation is unique.

Enjoy the day.

April 18, 2020
11:23 am
Norman1
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pcs said

Yes, I had noticed that EQ's crediting of interest had "slipped" from last-of-month on Sep-30th to 1st-of-month on Nov-1st. …

Was the crediting of interest actually changed or was it just its presentation on the statements?

If EQ Bank calculates the October interest payment on the closing balances of October 1 to October 31, then the interest payment could not have been credited on October 31. October 31 had already closed for the day. So, the October interest payment was effectively credited on November 1.

If the October interest was somehow credited on October 31, then it would have started earning interest on October 31. Did anyone notice a bit of extra interest in the subsequent November interest payment?

April 18, 2020
3:47 pm
Loonie
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I'm not sure I understand your initial question, but that which used to show up on the last day of the month now shows up on the first day of the subsequent one, but it is listed on the statement for the previous month which says it ends on the last day of the month - just to add to the confusion.

In any event, the question is why EQ's practice changed when ther was no apparent need to do so. I submit that it was to their financial advantage to do so.

Lots of banks, if not all, don't put through transfers until the next day (or, in the case of Meridian/motus, several business days later).

April 18, 2020
4:35 pm
Norman1
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It seemed to me that the end-of-the-month date of the interest payment was really a kludge to get it to print in the monthly statement for the same month the interest was for.

The interest payment could not have been credited on the last day of the month. That would affect the closing balance of that last day of the month which is used to calculate the interest payment itself!

If the interest payment was not credited before the daily closing balance of the last day of the month, then the payment must have been credited afterwards, the next day.

I don't think there was any advantage to EQ Bank in removing the kludge. One was not able to access the interest payment until after the close of the last day of the month. I don't think EQ Bank paid interest on that interest payment anyways until the next day.

April 18, 2020
7:50 pm
pcs
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My original question was about including the interest credited 2020-Jan-1st in the T5 for TY2019. EQ's response predicted in #4 and quoted in #5 is that the interest was earned in December 2019 therefore should be reported in TY2019.

No comment from them so far about why the crediting date changed at all.
However, "according to my calculations" :
Over the 15 months span from 2019-Jan-1st to 2020-Apr-1st the interest credited by EQ matches my expectations +/-0.4 cent or better every month with two exceptions :
- on 2019-Sep-30th they credited one extra day's interest, more than expected
- on 2019-Nov-1st they credited one less day's interest than expected
(These exceptions show up on only one of two accounts, but the second account's balance was too small to show a variation of +/-1 day.)
This seems like an artifact of the change in crediting date, as if they were calculating to and from Oct-1st, but the statement still reported the credit on Sep-30th ... (?guesswork?)

But overall, I don't see anything to suggest that they are systematically excluding one day's interest every month.

April 18, 2020
10:49 pm
Norman1
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pcs said

No comment from them so far about why the crediting date changed at all.
However, "according to my calculations" :
Over the 15 months span from 2019-Jan-1st to 2020-Apr-1st the interest credited by EQ matches my expectations +/-0.4 cent or better every month with two exceptions:

- on 2019-Sep-30th they credited one extra day's interest, more than expected
- on 2019-Nov-1st they credited one less day's interest than expected

… This seems like an artifact of the change in crediting date,…

I checked and do not see that with my interest payments.

My 2019-Sep-30 interest payment matches expected 2.3% interest for Sep-01 to Sep-30 within 0.3¢.

My 2019-Nov-01 interest payment matches expected 2.3% interest for Oct-01 to Oct-31 within 0.01¢!

April 18, 2020
11:04 pm
Loonie
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FWIW, we ran into something similar with a pension payout. I don't remember the details now, but it also had to do with the end-of-year payment. They paid out the money in the wrong year but put it on the T slip for the year when it should have been paid. In such a case, the amount is knowable well in advance, so there is no good reason to delay. I think it might have been the case that Dec 31 was on a weekend, but if OAS and CPP can accommodate that, then so should others. When we questioned this, they couldn't provide a memorable explanation but just said not to worry about it.

I haven't had enough money in EQ recently to make any meaningful calculations. You might have a rounding problem which caused the small discrepancies. I have found that i have to calculate to 3 decimals in order to match FI calculations on daily interest.

I remain suspicious because I don't see any reason why they had to make this change. it just makes my bookkeepign more awkward.

April 19, 2020
10:12 am
Norman1
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Three decimal places is not quite enough.

With three decimal places, the rounding error of the interest each day can be up to ±$0.0005. The cumulative error in a month could be up to

31 x ±$0.0005 = ±$0.0155 = ±1.55¢

Need at least four decimal places to ensure the cumulative error is under $0.00155.

I suspect EQ Bank made the change to simplify their software. Instead of having a special October 31 credit for interest that isn't really part of the October 31 closing balance and doesn't earn interest until November 1, they switched to an ordinary November 1 credit for the interest that behaves as desired for closing balance and interest calculations.

Perhaps that's why LBC Digital and Simplii Financial do what they do. They kept an October 31 interest payment. But, the October 31 interest payment is the interest from September 30 to October 30 instead of October 1 to October 31.

April 19, 2020
10:50 am
pcs
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For my Sep-30/Nov-1 exceptions, I don't think the issue is a rounding error in calculation. For a short period around that time, I had a large enough balance in the account that a single day's interest is ~ $2.50 instead of < 1¢. The simplest explanation is that the calculation is off by +/- 1 day : if I make that adjustment, the calculation matches the observed credit within 0.5¢.

April 19, 2020
11:27 am
Norman1
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Are you sure your calculations have the correct periods?

The September 30 interest payment should be for September 1 to 30.

But, the November 1 interest payment should be for October 1 to 31.

My October 1 closing balance is significantly different from my November 1 closing balance. So, I know the November 1 payment is definitely not for October 2 to November 1.

April 22, 2020
11:41 am
pcs
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Thanks @Norman1, I think that your explicit statement of dates&periods is a clearer re-statement of my observation about the mismatch of +/- one day's interest being an artifact of changing the crediting date.

Thanks all for the discussion on this thread. I think I'm done with the original question about the T5. FWIW, EQ hasn't specifically replied (yet) to my other question about the crediting date was changed : if I get anything I'll post it here for completeness.

April 22, 2020
3:14 pm
Norman1
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This looks like is a grey area in taxation.

Income Tax Act 12(1)(c) says any interest "received or receivable" in the year is taxable in that year:

Interest

(c) subject to subsections (3) and (4.1), any amount received or receivable by the taxpayer in the year (depending on the method regularly followed by the taxpayer in computing the taxpayer’s income) as, on account of, in lieu of payment of or in satisfaction of, interest to the extent that the interest was not included in computing the taxpayer’s income for a preceding taxation year;

CRA's interepretation in old Interpretation Bulletin IT-396R is that "receivable" means "when there is a clear legal right to receive it" which may not be necessarily when the taxpayer actually received the money in hand:

Receivable Method

4. Interest is receivable by a taxpayer when there is a clear legal right to receive it. To illustrate, assume that a taxpayer purchased a $1,000 bond on its issue date of April 1, 1980, bearing interest at 9% payable by semi-annual coupon on April 1 and October 1. On October 1, 1980, interest in the amount of $45 would be receivable by the taxpayer, since that is the amount which is legally payable on that day and would be the amount to be reported as income in 1980 under the receivable method even though the October 1st coupon was not negotiated until 1981 or a subsequent year. …

A possible argument is that the interest for the month of December became "receivable" December 31 by closing time of the bank and is therefore taxable in that year.

I guess it doesn't matter that the interest was posted to the account later that night, at perhaps 11:30 pm (December 31) or 2 am (January 1), long after the bank had closed for the day and there was no way the taxpayer could actually get his/her hand on the interest money until next year.

September 22, 2020
5:13 pm
pcs
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FYI : further discussion specifically about interest dates is in a new thread under EQ Bank.

September 23, 2020
7:07 am
topgun
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pcs said
FYI : further discussion specifically about interest dates is in a new thread under EQ Bank.  

I purchased a 5 year GIC on Jan 1, 2020. I assumed the interest payment date would be Jan 1, 2021. On my FI account it shows Dec 31, 2020. It looks like Leap Year/statutory holiday changes payment date. Having fun.

Have a Great Day

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