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Zag Throws In The Towel
December 14, 2018
6:09 am
anitavirginia
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RRSP gic closing transfer to other institution.

Has anyone received funds from transferred rrsp, to new institution.

February 9, 2019
12:16 pm
toto
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Was wondering if anyone got zag tax slips?

February 9, 2019
3:02 pm
Norman1
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I didn't receive a tax slip from Zag for 2017 and tallied the interest received myself.

I probably won't receive a tax slip for 2018 because the interest received from Zag in 2018 is low as well.

Issuing a T5 slip is optional when the total interest paid for the year is less than $50.

February 9, 2019
4:28 pm
Alexandre
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I wonder if $25 gift to account holders is classified as interest income. It is definitely (strictly speaking) taxable income, but I wonder if or how Zag will report it.

I have not received T5 tax slip from Zag for 2018 yet, but it is too soon. T5 deadline is end of February, I believe.

Interestingly enough, I made $49.24 in interest income from Zag in 2018. With $25 gift it is above reporting threshold, but below - without.

I also recall they promised to mail tax forms by regular mail to account holder postal address they have on file, but it would also make sense to check CRA My Account by end of March to see if T5 from Zag is there.

February 9, 2019
5:47 pm
Loonie
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Why are you convinced that the gift is taxable?

I would not consider it so because other FIs that offer such rewards do not include them in their tax slips.

February 9, 2019
6:30 pm
Doug
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Loonie is correct. These "gifts," which I agree is definitely a class act on Desjardins' part, are not taxable. No need to worry here, folks. sf-cool

I can't say I'm particularly surprised - Zag Bank, while they did improve their online banking experience, still didn't have a process by which to link external bank accounts electronically nor did they offer a particularly compelling bank-to-bank transfer process. Still, I credit Desjardins for giving it a solid try. Remember, Zag Bank has its origins in Bank West and Ubiquity Bank of Canada, which was previously owned by B.C.'s Prospera Credit Union but sold to Bank West many, many years ago.

Cheers,
Doug

February 9, 2019
7:41 pm
toto
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Thanks , I didn't realize that they were going to mail them out. I have a fairy large t5 from them in 2018, so it's not just on the 25.00 gift .

February 9, 2019
7:56 pm
Norman1
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In their winding down FAQ, part of the answer to the question "Will I be receiving any record of the closing of my account?" is

Zag Savings account
  • In December 2018, you will receive a final monthly statement that will be mailed to the address we have on file.
  • In addition, and if applicable, tax slips for 2018 will be mailed to your address on file in early 2019.
Zag GIC
  • Once your account is closed, you will receive a final statement that will be mailed to the address we have on file.
  • In addition, and if applicable, tax slips for 2018 will be mailed to your address on file in early 2019.
February 9, 2019
8:55 pm
Loonie
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Welcome back, Doug!

February 10, 2019
5:01 am
Alexandre
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Loonie said
Why are you convinced that the gift is taxable?

It will depend on how this money distribution from bank to its clients is recorded in Zag books.
$25 multiplied by the number of clients could be a hefty sum.

Monetary gifts between family and friends are usually non taxable, with few exceptions.
Monetary gifts from employer to employee should be treated as employee taxable income, with few exceptions.

Bank giving free money to their customers is case somewhere in between. The bank is not your friend, but it is not your employer, too.
If someone can find CRA rules on these specific type of money transactions, please share.

February 10, 2019
5:25 am
Loonie
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Any FI that gives me free money is definitely my friend!sf-wink

More seriously, I think this question came up on an earlier thread and that Norman resolved it for us, but I'm not sure.

I liken it more to other kinds of promotions. In the past, banks used to give you small appliances or radios for doing this or that. One of them gave out ipods or ipads or something like that a year or two ago. I don't think anybody expected to pay tax on them, and I don't imagine anybody did. It's basically the same thing.

Further, I don't see any advantage for the bank in declaring it as income to the client. It will make customers unhappy and would probably make their bookkeeping much more complicated.

I never joined Zag, but I have received bonuses from Meridian and Hubert, which were not included in my tax slip. The one from Meridian was in the neighbourhood of $200. I take that as indicating that they are not intended to be declared. as income.

What about those of you who have gotten referral bonuses from Achieva? Was that amount added to your tax slip?

February 10, 2019
7:10 am
Alexandre
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I must admit, I've got my corporate and personal taxation education from the USA, so I may be not familiar with the differences between Canadian and US tax rules in very obscure cases.

What I can find in regard to bank promotions from the IRS is the following:

Rewards that are given away as part of new banking account recruitment drives are considered income and can be taxed.
When a customer receives a gift for opening a bank account -- whether cash, a toaster or airline miles -- the value of that gift is generally treated as income and subject to tax reporting. If the value of those taxable rewards is more than $600, banks are required to send 1099 tax notices to both the IRS and the rewards recipient.

Note, that might be just US specific, because tax rules for gifting are also quite different in two countries.

Unfortunately, I can't easily find CRA's stand on that.

Also, as a side note, even if bank does not report $25 bonus to CRA, that is not necessarily proof the bonus is not taxable. For example, bank does not report interest income under $50 to CRA, but we are supposed to include it in our tax return.

Finally, banks bookkeeping is already complicated. What will complicate it more (for bank senior management) is not reporting the withdrawal of sum of $25 multiplied by the number of clients. It has to be booked by bank one or other way, just like promotions are. The way they book it might decide its tax implications for recipients.

In any case, $25 is not enough to worry much, unless you are a Canadian Al Capone already under scrutiny from the government.

February 10, 2019
4:42 pm
Norman1
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The $25 winding-down bonus paid by Zag Bank does satisfy all three requirements of a gift in paragraph 1.3 of Income Tax Folio S3-F9-C1, Lottery Winnings, Miscellaneous Receipts, and Income (and Losses) from Crime. CRA writes in paragraph 1.4 that it considers non-employee gifts to be non-taxable to the recipient:

Gifts and other voluntary payments

1.3 The term gift is not defined in the Act. In common law jurisdictions, the courts have said that a bona fide gift exists when:

  • There is a voluntary transfer of property,
  • A donor freely disposes of his or her property to a donee, and
  • The donee confers no right, privilege, material benefit, or advantage on the donor or on a person designated by the donor.

1.3.1 Under the Civil Code of Québec (C.C.Q.), a gift is a contract by which a donor transfers property to a donee without obtaining any advantage in return. As well, a “remunerative gift or a gift with a charge” constitutes a gift to the extent of the value in excess of any remuneration or charge. For more information, see Articles 1381, 1806, and 1810 of the C.C.Q.

1.4 Whether a transfer of property has been made voluntarily is a question of fact. In order for a transfer to be considered voluntary, there must be no obligation to make such a transfer. Amounts received as gifts are not subject to tax in the hands of the recipient.

1.5 However, sometimes individuals receive a voluntary payment or other valuable transfer or benefit by virtue of an office or employment from an employer, or from some other person. In such cases, the amount of the payment or the value of the transfer or benefit is generally included in employment income pursuant to subsection 5(1) or paragraph 6(1)(a). …

But, bonuses and payments for transferring funds in clearly do not meet the third condition for a gift. There is substantial "material benefit" to the financial institution that is paying incoming bonuses.

Perhaps, the term "gift" is not a good one for such incoming bonuses.

February 10, 2019
4:45 pm
Norman1
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Loonie said
Any FI that gives me free money is definitely my friend!sf-wink

More seriously, I think this question came up on an earlier thread and that Norman resolved it for us, but I'm not sure.

I think what I established earlier was such bonuses were exempt advantages to registered plans. Consequently, they were not considered to be contributions to the plans and they would not trigger de-registration of the plans.

February 15, 2019
4:15 pm
Doug
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Loonie said
Welcome back, Doug!  

Thanks, Loonie...it's only temporary. I'm still working on updating the "Services" and "Free chequing" comparison charts as I have time, but I'll get there. I've been very busy with school coursework this semester and last, but the end is near-ish. After this semester, I'll have done 14 courses and only need 6 more, so I should be all done except for my final practicum and 1 elective course after this year. 🙂

Cheers,
Doug

February 15, 2019
4:19 pm
Doug
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I agr

Loonie said
Any FI that gives me free money is definitely my friend!sf-wink

More seriously, I think this question came up on an earlier thread and that Norman resolved it for us, but I'm not sure.

I liken it more to other kinds of promotions. In the past, banks used to give you small appliances or radios for doing this or that. One of them gave out ipods or ipads or something like that a year or two ago. I don't think anybody expected to pay tax on them, and I don't imagine anybody did. It's basically the same thing.

Further, I don't see any advantage for the bank in declaring it as income to the client. It will make customers unhappy and would probably make their bookkeeping much more complicated.

I never joined Zag, but I have received bonuses from Meridian and Hubert, which were not included in my tax slip. The one from Meridian was in the neighbourhood of $200. I take that as indicating that they are not intended to be declared. as income.

What about those of you who have gotten referral bonuses from Achieva? Was that amount added to your tax slip?  

I agree...I'd also liken these cash and non-cash promotions to when your employer gives you a cash, cash equivalent, or non-cash (i.e., tangible item) Christmas bonus gift. It's not one that's paid on your payroll remittances, but could be in the form of a grocery store gift card (cash equivalent) or small amount of cash in an envelope. Not sure what the limit is, but think it's $400-500 per year per person. I think a similar principle applies here whereby such items are considered non-taxable gifts. Personally, I'd rather have the cash than a Samsung tablet. 😉

Cheers,
Doug

February 15, 2019
6:23 pm
Norman1
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The analogy with employee "gifts" and "awards" is not a very accurate one.

According to CRA: Gifts, awards, and long-service awards, cash and near-cash employee gifts and awards are always taxable:

Cash and near-cash gifts or awards are always a taxable benefit for the employee. A near-cash item is one that functions as cash, such as a gift certificate or gift card, or an item that can be easily converted to cash, such as gold nuggets, securities, or stocks.

The limit for non-cash employee gifts and awards is $500 per year:

You may give an employee an unlimited number of non-cash gifts and awards with a combined total value of $500 or less annually. If the fair market value (FMV) of the gifts and awards you give your employee is greater than $500, the amount over $500 must be included in the employee's income. For example, if you give gifts and awards with a total value of $650, there is a taxable benefit of $150 ($650-$500).

As well, I don't think CRA's gift policies would apply to promotional bonuses. They are not really gifts. To be a gift, it is required that "the donee confers no right, privilege, material benefit, or advantage on the donor or on a person designated by the donor."

February 21, 2019
2:50 pm
toto
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Just got my zag t5 in the mail.
Interest doesn't seem right.
I'll have to investigate.

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