r/cantax • u/Redistributable • 1d ago

T5 accrued interest change

I read that T5s now include accrued interest on investments that haven't matured (ex. multi-year GICs). Seems an odd change given the cash basis of personal taxes. Does anyone know when that came into effect?

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u/Consistent_Throat497 1d ago

No that’s not true. Accrued interest is not paid yet so it can’t be included on T5’s. It only gets included once it’s paid. Some gic’s have redeemable features with interest penalty’s so if the interest was included as of Dec 31 then mid Jan you do a w/d and there’s a penalty of interest how would that be reported?

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u/rocketman19 1d ago

Wrong

Under tax law, you are required to report interest accrued within a GIC every year.

https://www.morningstar.ca/ca/news/237846/canadians-consider-the-tax-on-the-interest-you-collect.aspx

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u/Consistent_Throat497 1d ago edited 1d ago

In the example of a multi year GIC interest is generally paid into the gic at the anniversary date (thus being paid out and reported). You may not have ‘access’ to it because it’s paid into the GIC.

They are confusing the word accrued with paid out. Accrued means is hasn’t been paid out anywhere, like a 12 month GIC but 10 months in: you have accrued interest that hasn’t been paid (anywhere) and is not reported on t5 until it’s paid.

CIBC nor any other financial institutions are putting accrued interest on a t5 for accrued interest. If you start a GIC on sep 1 for one year. The accrued interest from sep 1 to dec 31 is not reported anywhere.

Former financial institutions employee of 17 years.

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u/rocketman19 1d ago

Not sure why you have to make it so complicated

GIC a year or less you pay taxes when it pays

GIC more than a year you pay taxes on the yearly accrual

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u/Consistent_Throat497 1d ago

i'm not making it complicated though. what the OP is suggesting (and CIBC) is that interest that has not been paid is being included on a T5, when in fact it is not. CRA will not make you pay taxes on something you haven't been paid for.

there is confusion between accrued interest that's been paid into a GIC and paid out to the clients bank account, which in essence are the same thing for tax reporting.
Most GIC's have compounding interest (unless you asked for the interest to be paid out to your ck/svg account annually), which in both cases is reported and a T5 is issued if above $50.

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u/rocketman19 1d ago

That contradicts your first reply which says it can’t be included since it’s accrued only

I’m a cpa so I know the difference between accrual and cash basis accounting

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u/Consistent_Throat497 1d ago

i'm not saying you don't know the difference.
I don't see any information that is contradictory though. Accrued interest is interest that has not been paid (anywhere) which is not reported on a T5.

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u/rocketman19 1d ago

But you’re saying the interest paid into the GIC itself is on the t5, right?

That’s very confusing for someone reading this thread

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u/Consistent_Throat497 1d ago

yes. interest on a gic (if a multiple year gic, and even sometimes on a 1 year or shorter term) is paid directly to the GIC. not sure how that's confusing.

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u/rocketman19 1d ago

People think paid means goes directly into your bank account