My Ex-Employer issued a T5 and dividends I never got

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Chuckly
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My Ex-Employer issued a T5 and dividends I never got

Post by Chuckly »

Hi,

I'm new to this forum, and spent a few hours using the search button to no veil.

To my surprise last year, I got a t5 from my ex-employer with a very very large sum of money as dividends. Dividends I never saw the light of.
Was directed by the revenue of quebec agents to file a mr 93.1.1 form. A few days ago, having provided access to all my bank accounts, and daily statements of all the periods during, before and after as the agent requested: Sorry, we believe you, but not enough proof.

I would be more than happy to pay the taxes owed on that amount, but I never got dividends! (and I strongly suspect I should not get these dividends).

So, what now?
The revenue of quebec won't amend this, nor will my ex employer.

So, any company can basically send t5 to whatever absurd amount they invent and, the recipient must pay taxes on it?!

Please help. There is no way to miraculously make this money appear.... meaning I'd have to bankrupt or sell the house.

Thank you.
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adrian2
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Re: My Ex-Employer issued a T5 and dividends I never got

Post by adrian2 »

Something got lost in translation.

Employers usually pay salaries, and issue T4 for that.
T5 is issued by dividend paying companies, when they pay their shareholders, who usually are not employees.

Were you enrolled in a stock purchase plan administered by your employer, where you periodically purchased their stock?
One reason for which the dividends may not appear in your bank account statements is if the plan automatically reinvested dividends.
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Re: My Ex-Employer issued a T5 and dividends I never got

Post by kcowan »

Yup i think adrian has nailed it. You have a stock holding from a dividend reinvestment plan. If you want the money, change your option to receive the dividends.
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Re: My Ex-Employer issued a T5 and dividends I never got

Post by Spudd »

If neither the CRA nor your ex-employer are being helpful, maybe a tax lawyer?
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Re: My Ex-Employer issued a T5 and dividends I never got

Post by Chuckly »

Hi, thank you for all your replies.

I did get a T4, but a T5 as well. I was a share holder for a brief time, and when I quit, sold the shares back at the same price I bought them for. (no profit).

The T5, declares dividends paid to me. The amount is more than 3 times my yearly salary there.
So now I have taxes to pay on that.. which is close to half my yearly salary in taxes :!: :shock:

If I was enrolled in a stock purchase plan administered by my employer, I was never informed.
If the plan automatically reinvested dividends, how come I have to pay taxes on a huge amount I never profited from?

If I want the money, and change my option to receive the dividends, who do I address if the company is consistently non cooperative about this issue?

I see 2 options: either they need to pay up those dividends they declared I got, so I can pay my taxes on that profit.
Or, they should have never issued a T5 for what I think are imaginary dividends.

Day one (a year ago) when I got my T5, I contacted the CRA, they guided me to provided all my communications and documentation, and access to bank accounts so they can amend it. Guided me through the MR 93.1.1 forms also. Their guidance took 350 days.

Only to say: we clearly see you never got paid those... but you still have 30 days to pay up taxes on those.

:?: :!: :?: :shock:

can HR Block help?
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Re: My Ex-Employer issued a T5 and dividends I never got

Post by Spudd »

H&R Block employees are just regular folk who have passed an H&R Block tax prep course, so I don't think they would be able to help.

Personally, as I said earlier, I think this sounds like it might need a tax lawyer. I googled and found the following article that may be of help:

http://www.mondaq.com/canada/x/499566/I ... ccountants

A chartered accountant would definitely be preferred over H&R Block, but I feel like in this case it's gonna need to be a lawyer.
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Re: My Ex-Employer issued a T5 and dividends I never got

Post by OnlyMyOpinion »

As Spudd suggested above, have you spoken to your ex-employer for an explanation?
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Re: My Ex-Employer issued a T5 and dividends I never got

Post by DavidR »

Sounds like a deemed dividend, from shares being redeemed. Unfortunately not the same thing as selling shares.

Purchase
If you purchase shares from another shareholder, or the company issues you new shares from Treasury, the amount you pay is your cost base. For example, assume 5,000 shares at $10 each = $50,000
Sale
If you sell your shares for the same amount to another shareholder, then you have no gain or loss, since proceeds of disposition $50,000 are equal to your cost base $50,000.

HOWEVER, if your shares are redeemed (purchased by the company for cancellation) , then the math is completely different. A deemed dividend will arise if the redemption amount is different from the "Paid Up Capital" amount. Although your Cost base is $50,000 in my example, your PUC may not be, because PUC per share is averaged out among all the issued and outstanding shares.
So if the founders for example had originally (many years ago) paid 10 cents per share for 950,000 shares, then that $95,000 for 950,000 gets averaged in with your $50,000 for 50,000 making the PUC $145,000 for 1,000,000 shares or $0.145 per share. Your 50,000 have PUC $7,250.
So on redemption, your $50,000 payment is considered to be $42,750 of Deemed dividend and $7,250 as proceeds of disposition for the shares. You therefore report a capital loss of $47,750.
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Re: My Ex-Employer issued a T5 and dividends I never got

Post by Chuckly »

OnlyMyOpinion wrote: 31 Jan 2018 15:52 As Spudd suggested above, have you spoken to your ex-employer for an explanation?
I did, and their answer is vague and they say seek tax counsel.
I asked directly if any dividends where issued? Did I miss a payment of them? What account should I expect them to be in?
Were they even supposed to be issued?

and I'm getting a non cooperative, no pointing in the right direction: seek tax counsel.
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Re: My Ex-Employer issued a T5 and dividends I never got

Post by Chuckly »

Does this mean, anyone can open a company, employ a person, sell them a share for 2$,
(when they quit and are forced to sell the shares back to the company for 2$)

then issue that employee a t5 of 5 million dollars in dividends, and the employee must pay tax on this?
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Re: My Ex-Employer issued a T5 and dividends I never got

Post by beachcomber »

Sounds like a very ugly situation to me. For years I operated without an accountant - about 25 years ago I finally was shown the light - but it took a Revenue Canada auditor to smarten me up."Beachcomber" he said "your financial situation would be much improved if you stopped trying to DIY and hired an accountant". He was right! The accountant and I have both prospered ever since. Good luck!
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Re: My Ex-Employer issued a T5 and dividends I never got

Post by adrian2 »

Chuckly wrote: 31 Jan 2018 14:21 I did get a T4, but a T5 as well. I was a share holder for a brief time, and when I quit, sold the shares back at the same price I bought them for. (no profit).

The T5, declares dividends paid to me. The amount is more than 3 times my yearly salary there.
So now I have taxes to pay on that.. which is close to half my yearly salary in taxes :!: :shock:
How much was the amount you paid for the shares? Was it more than 3 times your yearly salary there?
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Re: My Ex-Employer issued a T5 and dividends I never got

Post by Chuckly »

adrian2 wrote: 31 Jan 2018 20:29
Chuckly wrote: 31 Jan 2018 14:21 I did get a T4, but a T5 as well. I was a share holder for a brief time, and when I quit, sold the shares back at the same price I bought them for. (no profit).

The T5, declares dividends paid to me. The amount is more than 3 times my yearly salary there.
So now I have taxes to pay on that.. which is close to half my yearly salary in taxes :!: :shock:
How much was the amount you paid for the shares? Was it more than 3 times your yearly salary there?
No, it was less than a third of my salary.
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Re: My Ex-Employer issued a T5 and dividends I never got

Post by Chuckly »

Chuckly wrote: 31 Jan 2018 20:33
adrian2 wrote: 31 Jan 2018 20:29
Chuckly wrote: 31 Jan 2018 14:21 I did get a T4, but a T5 as well. I was a share holder for a brief time, and when I quit, sold the shares back at the same price I bought them for. (no profit).

The T5, declares dividends paid to me. The amount is more than 3 times my yearly salary there.
So now I have taxes to pay on that.. which is close to half my yearly salary in taxes :!: :shock:
How much was the amount you paid for the shares? Was it more than 3 times your yearly salary there?
No, it was less than a third of my salary.

For simple math:

bought 15% of the company, from the co-founder directly from him, as approved and encouraged by the company.

For 25 000$.

When I sold it, I had to sell to the COMPANY not the shareholder. Because the company reserved that right.

My salary was 60 000$.
The surprised T5 came for dividends paid out to 195 000$. (which I am tax on as gain)(what gain?)
My T4's salary was 60 000$
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Re: My Ex-Employer issued a T5 and dividends I never got

Post by Hackster »

Based on the info and numbers you provided, I have a theory that at be worth exploring with your ex-employer. I would venture a guess that $195K dividend is how a founder/owner of the company is paying himself/herself. Smells like a clerical error of issuing the T5 to the wrong employee.
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Re: My Ex-Employer issued a T5 and dividends I never got

Post by Chuckly »

I actually have all my email exchanges documented when i directly ask these questions.

they avoid and say: seek your own counsel.
how was i getting these dividends? Answer: seek your own counsel.
did every share holder get these dividends but you missed or forgot me? Answer: we told you.. seek your own tax counsel.

- Ok I will thank you, but can you at least tell me was I even suppose to GET those dividends but it was a mistake? Seek your own tax counsel.

Like... it would be my pleasure to receive the amount declared in the T5.. and then, my pleasure to pay my taxes due on it.
But, I suspect its some trickery.
So I opposed the amount with a 93.1.1 Form... to no veil. CRA said: we clearly see you never got that money. But its not enough proof for us to amend it... ask your employer to amend it.

So I once again asked my employer: can you amend this amount please? its a mistake. Answer: we told you... seek your own tax counsel.

What now?
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Re: My Ex-Employer issued a T5 and dividends I never got

Post by Peculiar_Investor »

I presume your mention of 93.1.1 is Notice of Objection | Revenu Québec. The See Also sidebar offers some ideas. Have you taken a look at them?

Given the amounts that seem to be involved, why haven’t you engaged legal or tax counsel to pursue next steps? Maybe that will get your ex-employers proper attention to get this resolved.
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Re: My Ex-Employer issued a T5 and dividends I never got

Post by AltaRed »

I agree. Seek your own tax counsel.

Ultimately, it may be that you have to sue the ex-employer for damages and legal/court costs.
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Re: My Ex-Employer issued a T5 and dividends I never got

Post by OptsyEagle »

I may be a little confused but it sounds like you bought the company shares for $25,000 and later sold them back to the company for $25,000. Then got a T5 for $195,000.

Even if DavidR is right, and so far it is the best theory, I can't see anyone getting a T5 for $195,000 when they only received $25,000.

I think you should seek legal council. Time to sue them into the stone age. Sounds like the only way you are going to get them to start telling you what is really going on. They are obviously trying to avoid this and are simply hoping you will pay the tax and move on. I wouldn't, nor should you.
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Re: My Ex-Employer issued a T5 and dividends I never got

Post by adrian2 »

OptsyEagle wrote: 01 Feb 2018 15:54 I may be a little confused but it sounds like you bought the company shares for $25,000 and later sold them back to the company for $25,000. Then got a T5 for $195,000.

Even if DavidR is right, and so far it is the best theory, I can't see anyone getting a T5 for $195,000 when they only received $25,000.

I think you should seek legal council. Time to sue them into the stone age. Sounds like the only way you are going to get them to start telling you what is really going on. They are obviously trying to avoid this and are simply hoping you will pay the tax and move on. I wouldn't, nor should you.
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Re: My Ex-Employer issued a T5 and dividends I never got

Post by scorpionman »

I can offer a view from the other side of an employer submitting a T slip in duplicate online to CRA accidently. I can tell you , the left hand doesn't know what the right is doing and it takes ages and ages and many calls to get it cancelled. You can in fact cancel the slip online but the processing takes a long time. So without even employer desire to fix it I can imagine it's quite tough.
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Re: My Ex-Employer issued a T5 and dividends I never got

Post by max88 »

What kind of financial engineering is this? I have difficulty wrapping my head around it.

OP purchased 15% of the company for $25,000 from a co-founder.
When OP quit, the shares were sold for $25,000 to the company.
OP was paid $60,000 in salary, and received T4 for this.
OP received T5 for $195,000 dividend, but never received the amount. OP proved this to CRA by various means, including providing bank statements etc.

If this is deemed dividend as explained by DavidR, then the math should work like this:
OP sold shares for -$170,000 to the company when quit. This means OP had to pay $170,000 to dispose of the shares. Yes, pay, not get paid. The shares were liability, not asset.
The company paid OP $195,000 dividend. $170,000 was deducted to pay for disposal of the shares, $25,000 was paid out to OP. T5 for $195,000 was issued. OP may have a capital loss of $195,000.
$60,000 was employment income. This may be a condition, but not part, of the share acquisition/disposal transaction.

This is only my speculation.
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Re: My Ex-Employer issued a T5 and dividends I never got

Post by Chuckly »

To follow up... CRA want more proof now.
More proof of negative facts. More proof I never had a twin brother almost :shock:

Hired an accountant Ex-CRA.. 1000$ down the hole, gave him right to follow up with 3rd level (escalation) CRA agent.

CRA still wants more proof even after being asked to go through (and read out loud) documentation.

Accountant made CRA agree to review documents again. CRA agreed, but added:" But this won't change anything".

I think now this is going to court...................... And fighting a (small) corporation that is playing around with their finances like this, may not only cost me more, but they may bankrupt before I may NEED to pivote 180 degree's and say:" Ok fine CRA, I'll pay the taxes on this invented dividend, as soon as corporation proves pay out. And go after receiving payout.

What the HECK is going on!
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