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Human error at TDDI cost me several hundred dollars -- any recourse?

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  • Oct 11th, 2019 7:36 am
[OP]
Newbie
Oct 7, 2019
5 posts
2 upvotes

Human error at TDDI cost me several hundred dollars -- any recourse?

TLDR: A CS rep at TDDI screwed up, and as a result I have paid $$hundreds in unnecessary taxes. Is there a way to get it back?

Hi,

Just a quick question for anyone who may have been through a similar situation.

I have a self-directed RSP account with TD Direct Investing. In my USD account there I own some shares of Vanguard's VTI ETF. Around May of this year, I noticed that withholding taxes were now being deducted from US dividends paid into this account. This is not supposed to happen in an RSP.

The first CS rep I spoke with at TD (back in May) told me I needed to send in an updated form W8-BEN to fix this situation. I did so electronically and this rep confirmed their systems were now up to date. The problem was not actually fixed, however. There were withholding taxes applied to the next two dividend payments -- I waited two cycles just to be sure.

After phoning in again, a different CS rep this time told me that their systems actually hadn't been correctly updated back in May. Apparently there is a hard-to-spot checkbox somewhere in the TD backoffice software that actually disables the withholding tax; in my case this checkbox had not been checked even after the W8-BEN was received.

This human error entirely the fault of TD CS reps has cost me several hundred dollars in pointless withholding taxes in my USD RRSP account. I asked for compensation but the rep claimed there is no direct compensation in cases like this. Her advice was to talk to a tax expert and get the money refunded somehow at tax time. I'm not tax resident in Canada at the moment, and given that RRSP accounts are never supposed to be taxed (or even mentioned in my tax return, aside from withdrawals?) this advice seems totally weird and impractical.

Is there anything I can do, or should I just assume this money is gone forever?


Thanks!
17 replies
Deal Addict
Sep 19, 2009
2073 posts
872 upvotes
Toronto
gendrol75 wrote: The first CS rep I spoke with at TD (back in May) told me I needed to send in an updated form W8-BEN to fix this situation. I did so electronically and this rep confirmed their systems were now up to date. The problem was not actually fixed, however. There were withholding taxes applied to the next two dividend payments -- I waited two cycles just to be sure.
The guy was definitely screwing with you. W8-BEN is never required for RRSP.
Deal Addict
User avatar
Apr 23, 2009
1733 posts
707 upvotes
gendrol75 wrote: TLDR: A CS rep at TDDI screwed up, and as a result I have paid $$hundreds in unnecessary taxes. Is there a way to get it back?

Hi,

Just a quick question for anyone who may have been through a similar situation.

I have a self-directed RSP account with TD Direct Investing. In my USD account there I own some shares of Vanguard's VTI ETF. Around May of this year, I noticed that withholding taxes were now being deducted from US dividends paid into this account. This is not supposed to happen in an RSP.

The first CS rep I spoke with at TD (back in May) told me I needed to send in an updated form W8-BEN to fix this situation. I did so electronically and this rep confirmed their systems were now up to date. The problem was not actually fixed, however. There were withholding taxes applied to the next two dividend payments -- I waited two cycles just to be sure.

After phoning in again, a different CS rep this time told me that their systems actually hadn't been correctly updated back in May. Apparently there is a hard-to-spot checkbox somewhere in the TD backoffice software that actually disables the withholding tax; in my case this checkbox had not been checked even after the W8-BEN was received.

This human error entirely the fault of TD CS reps has cost me several hundred dollars in pointless withholding taxes in my USD RRSP account. I asked for compensation but the rep claimed there is no direct compensation in cases like this. Her advice was to talk to a tax expert and get the money refunded somehow at tax time. I'm not tax resident in Canada at the moment, and given that RRSP accounts are never supposed to be taxed (or even mentioned in my tax return, aside from withdrawals?) this advice seems totally weird and impractical.

Is there anything I can do, or should I just assume this money is gone forever?


Thanks!
I am sorry OP! Don’t know what to say other than that I have a strong dislike for big 5. Each one has screwed me in different ways over the years. I don’t have a suggestion for you. I buy their shares but no longer have any products with them.

I bank with Simplii and for investments I have QT, VB and IB. You get the hint!! Switch now and your will recover your loss and more in no time.

Screw the banks!!!
Sr. Member
Mar 16, 2018
804 posts
882 upvotes
Hamilton
ruchir wrote: I am sorry OP! Don’t know what to say other than that I have a strong dislike for big 5. Each one has screwed me in different ways over the years. I don’t have a suggestion for you. I buy their shares but no longer have any products with them.

I bank with Simplii and for investments I have QT, VB and IB. You get the hint!! Switch now and your will recover your loss and more in no time.

Screw the banks!!!
Simplii is CIBC though... even if you go to their mutual fund page, it’s just CIBC’s ridiculously priced funds with some Simplii lipstick on lol
Deal Addict
User avatar
Apr 23, 2009
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ownthesky wrote: Simplii is CIBC though... even if you go to their mutual fund page, it’s just CIBC’s ridiculously priced funds with some Simplii lipstick on lol
I agree 100%........but when I said Simplii, I simply meant their chequing account and not mutual funds.

I don’t do mutual funds....but for those that do mutual funds (which I strongly discourage), I suggest QT, VB, and IB but never CIBC.
Deal Fanatic
Nov 22, 2015
5781 posts
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ownthesky wrote: Simplii is CIBC though... even if you go to their mutual fund page, it’s just CIBC’s ridiculously priced funds with some Simplii lipstick on lol
Pretty sure they are less expensive than CIBC funds. There's an MER discount for Simplii clients
Deal Addict
Oct 1, 2006
2259 posts
2049 upvotes
Montreal
I would escalate this issue with TD. Try Twitter/Facebook?

There are no withholding taxes on USD dividends in an RRSP account and there is no need to fill out an W8-BEN form.

The W8-BEN form is for a non-registered account and can reduce the withholding tax from 30% to 15%.
Deal Addict
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May 11, 2014
4626 posts
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Iqaluit, NU
I would escalate further. Waiting until tax time is going to likely not work. The problem is that when the CRA notes the dividends are in an RRSP account, they are going to tell you that because it is in a registered account, you can't claim the foreign tax credit despite the fact that it was taken off and not of fault of your own. The same occurs with TFSA even though you pay withholding taxes on US dividends in a TFSA. So US dividends are better in a non-registered vs a TFSA because of this.

Call out on TD on facebook/twitter etc. They don't like bad publicity.
Support your local Credit Union!

Sask Pension Plan Upto $6600/yr in Credit Card spending on RRSP contributions
http://forums.redflagdeals.com/sask-pen ... ns-2167222
[OP]
Newbie
Oct 7, 2019
5 posts
2 upvotes
Thanks everyone for the responses.

I didn't realize W8-BEN has nothing at all to do with RRSP accounts. I wonder then why TD's system even allows the possibility of withholding taxes in a USD RSP account. I do have cash accounts also, and my W8-BEN for these accounts had legitimately expired, This apparently affected all my accounts including RSP.

I'll think about going down the social media publicity route. At this stage I agree it seems the likeliest means of getting something back.
Deal Addict
User avatar
May 11, 2014
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Iqaluit, NU
ruchir wrote: I agree 100%........but when I said Simplii, I simply meant their chequing account and not mutual funds.

I don’t do mutual funds....but for those that do mutual funds (which I strongly discourage), I suggest QT, VB, and IB but never CIBC.
CIBC Investor's Edge is quite price competitive I have to say.
Support your local Credit Union!

Sask Pension Plan Upto $6600/yr in Credit Card spending on RRSP contributions
http://forums.redflagdeals.com/sask-pen ... ns-2167222
Deal Addict
User avatar
Apr 23, 2009
1733 posts
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xgbsSS wrote: CIBC Investor's Edge is quite price competitive I have to say.
Amongst the big banks? Yes!! I have to agree.
Member
Jul 19, 2007
209 posts
151 upvotes
Sarnia
I just moved company mutual funds into my RBC DI accts. I was told about 5 business days to do the transfer and after some phone calls and about 45 days later it was finally done. On the last phone call with the bank I told them the mutual fund had dropped about $200 in value and that I would like 20 free trades to make up the loss. They had no problem giving me the free trades.
Deal Addict
Dec 28, 2007
1024 posts
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OP mentioned that he/she is not a tax resident in Canada. I'm no expert on such matters, but could that have an effect on how US dividends are treated in an RSP account? i.e. depending on tax treaties between Canada, the US, and whatever country in which OP is tax resident, the withholding tax may not be waived.
[OP]
Newbie
Oct 7, 2019
5 posts
2 upvotes
JUnit wrote: OP mentioned that he/she is not a tax resident in Canada. I'm no expert on such matters, but could that have an effect on how US dividends are treated in an RSP account? i.e. depending on tax treaties between Canada, the US, and whatever country in which OP is tax resident, the withholding tax may not be waived.
I wondered about this too, but the withholding taxes only began suddenly in October 2018. I've been non-resident since 2013.

What's more, the CS rep I spoke to claimed that submitting my W8-BEN and updating their backoffice software appropriately should stop the withholding taxes going forward. According to others above, W8-BEN should not be required for RSP accounts at all. In the mean time I'm out almost $500.
Deal Addict
Dec 28, 2007
1024 posts
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gendrol75 wrote: I wondered about this too, but the withholding taxes only began suddenly in October 2018. I've been non-resident since 2013.

What's more, the CS rep I spoke to claimed that submitting my W8-BEN and updating their backoffice software appropriately should stop the withholding taxes going forward. According to others above, W8-BEN should not be required for RSP accounts at all. In the mean time I'm out almost $500.
Is it possible that you should have had tax withheld on these dividends since 2013? Perhaps TDDI's mistake is that they didn't start deducting the tax sooner. TDDI CSRs and posters on RFD are most likely not familiar with the intricacies of international tax law.
[OP]
Newbie
Oct 7, 2019
5 posts
2 upvotes
I've spoken to a supervisor at TDDI.

For anyone who's interested, their explanation for the withholding taxes is now that the IRS has something called a "5-year rule". When you leave Canadian tax residency, the IRS will refrain from charging withholding taxes on the dividends (from US shares) in your RRSP for 5 years. After this period it's 30%, or 15% if an up-to-date W8-BEN has been submitted -- presumably the same as in a non-registered account.

This explanation does fit the facts of my case, but I've never heard of any such 5-year rule. I'll keep googling and searching irs.gov, but can anyone point me in the direction of further info?
Deal Fanatic
Mar 24, 2008
6052 posts
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Toronto
gendrol75 wrote: I've spoken to a supervisor at TDDI.

For anyone who's interested, their explanation for the withholding taxes is now that the IRS has something called a "5-year rule". When you leave Canadian tax residency, the IRS will refrain from charging withholding taxes on the dividends (from US shares) in your RRSP for 5 years. After this period it's 30%, or 15% if an up-to-date W8-BEN has been submitted -- presumably the same as in a non-registered account.

This explanation does fit the facts of my case, but I've never heard of any such 5-year rule. I'll keep googling and searching irs.gov, but can anyone point me in the direction of further info?
I believe you have been provided an explanation of what's going on here. What do you want to achieve by googling and searching for more information on this? Perhaps you should speak with an accountant who specializes in this field?
Illegitimi non carborundum
[OP]
Newbie
Oct 7, 2019
5 posts
2 upvotes
ksgill wrote: I believe you have been provided an explanation of what's going on here. What do you want to achieve by googling and searching for more information on this? Perhaps you should speak with an accountant who specializes in this field?
Mostly I just want to confirm whether the explanation I was given is the correct one.

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