BMOIL debiting incorrect amount for US withholding tax

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Hogwild
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BMOIL debiting incorrect amount for US withholding tax

Post by Hogwild » 12 Sep 2017 18:52

Hi everyone:

I have a BMO Investorline account in which I own some SHV (iShares US short treasury bond ETF). I just got my first distribution. The account is an unregistered, cash account. Instead of 15%, the amount debited for US withholding tax was closer to 23.8%. I called BMOIL to ask why. The person had no idea, went to ask a supervisor. She claimed that person told her there might be other deductions added to the amount that were appropriate. It sounded to me like BS. I called Blackrock. They told me that was nonsense, and that they didn't deduct the withholding taxes, the brokerage did.

Called back BMO and they seem uninterested and unwilling to move on this, blaming it on Blackrock. What can you suggest I say to them to get them motivated. It seems sometimes the brokerages act like they're doing you a big favour by just holding your funds.


Thanks in advance.

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AltaRed
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Re: BMOIL debiting incorrect amount for US withholding tax

Post by AltaRed » 12 Sep 2017 19:41

The amount is odd. The withholding should be 15%...if you have a W8BEN in place with BMO IL. Do you hold this asset on the USD side of your portfolio?

P.S. There can be another issue. It is possible the transfer agent converted the USD distribution to CAD for Canadian residents (and charged a FX fee) and then BMO IL converted it back to USD (along with another FX fee) if you hold this asset on the USD side of the account.

Added: This problem has risen before with some brokerages, some issuers and/or some transfer agents. You need to work backwards by first asking BMO IL how they receive the distribution from the transfer agent. It might come in CAD from the transfer agent and if so, then the problem needs to be worked back to BlackRock and the transfer agent. Strange things have happened with dividends from some stocks like BAM.A for example.... As I understand it, BMO IL has no discretion in how they receive distributions. They come in 'as they are' and BMO IL books them to the account where the asset resides.
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jay
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Re: BMOIL debiting incorrect amount for US withholding tax

Post by jay » 13 Sep 2017 11:12

I am with BMO and have held SHY in a non reg account as well for well over a year. My withholding tax has been 14.95%

Hogwild
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Re: BMOIL debiting incorrect amount for US withholding tax

Post by Hogwild » 13 Sep 2017 12:46

Thanks, both of you. That was wery helpful.

AltaRed, just to clarify, is this that you described tricky to fix? If that was the problem, will it likely be tough to convince BMO staff that that was the problem? Would it be possible for you to explain the chain of events describing how the payments/debits are made so I can understand better?

I called BMOIL again this morning. (Couldn't log on to their Website last night or this morning for more than a few seconds due to technical issues.) :x

I spoke with a rep. who said that he could not find a W8-BEN form on record for me. This is after I called last month, just to ensure that my W8-BEN form was current. On that call last month, the rep. said it was just fine.

The rep. with whom I spoke this morning registered a case ticket, and told me it will be investigated. At least he agrees that the amount is wrong. He said they'll get back to me within a couple of days.

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AltaRed
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Re: BMOIL debiting incorrect amount for US withholding tax

Post by AltaRed » 13 Sep 2017 12:57

Hogwild wrote:
13 Sep 2017 12:46
Thanks, both of you. That was wery helpful. AltaRed, just to clarify, is this that you described tricky to fix? If that was the problem,
will it likely be tough to convince BMO staff that that was the problem?
You likely cannot do anything about the distribution you have already received (if the remittance to Uncle Sam has already been made). But you can fix it on a forward basis.
- Firstly, you need to have a valid W8BEN in place. If you already do... BMO IL should make you whole because it is their error.
- Secondly, BMO IL needs to tell you in what currency they receive the SHY distribuition. If it is in USD, you need to be sure you have SHY sitting on the USD side of your account to prevent conversion/commission/forex to CAD. If they receive the distribution in CAD, then you need to hold SHY on the CAD side of your account to prevent conversion/commission/forex to USD.

I have had to deal with this issue a few times in the past to make sure my asset is on the same currency side of the account that the brokerage receives the dividend/distribution in....albeit in the past with Scotia iTrade, they were doing conversions at the spot rate (no commission). So, for example, when I bought AQN, I asked Scotia in what currency they received AQN dividends and when they said USD, I journalled AQN over to the USD side of my account.
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Hogwild
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Re: BMOIL debiting incorrect amount for US withholding tax

Post by Hogwild » 13 Sep 2017 13:42

AltaRed:

How do I know if my SHV is properly in the USD side of my account? It shows under "Your US Dollar Investments" on the statement. Is that good enough or do I need to find out more?

I thought I might submit another W8-BEN form, seeing as it seems BMO can't find my first one. Will submitting another screw up their investigation?

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AltaRed
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Re: BMOIL debiting incorrect amount for US withholding tax

Post by AltaRed » 13 Sep 2017 13:47

I can't be sure... I don't have a USD side to my BMO IL account.

But investments on the USD side of your account should be in a separate section from CAD investments. IOW, you should have a CAD side with a sub-total in CAD of your CAD investments and a USD side with a sub-total in USD or your USD investments.

If they cannot find your W8BEN, submit a new one. Nothing can go wrong that I can think of submitting another one. As an aside, did you not keep a photocopy of the last one you submitted and when?
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Hogwild
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Re: BMOIL debiting incorrect amount for US withholding tax

Post by Hogwild » 13 Sep 2017 14:05

AltaRed:

Yes, I do believe I have separate totals for $USD and $CAD. My statements show a $USD total, a $CAD total, and below, a sum for both of them combined, in $CAD.

I actually didn't keep a copy of my W8-BEN form for BMO. I found it for my other two brokerages, but I can't find my BMO one. If I did it on the same date as the other two, it shouldn't have expired until end of this year. I will submit another one and post back here as soon as BMO (hopefully) gets back to me.

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Re: BMOIL debiting incorrect amount for US withholding tax

Post by Hogwild » 19 Sep 2017 00:00

BMO did not call, in spite of their promise to call me back by Friday night. I called them today, and was told that the problem would be resolved in two parts. First, they would correct the incorrect withholding tax amount from the next payment on, and second, that they would credit me the difference between what the original payment was and what it should have been.

Here's hoping. I'll post back on my next payment date with the results.

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Re: BMOIL debiting incorrect amount for US withholding tax

Post by Hogwild » 21 Sep 2017 00:40

I'm happy to report that on Monday when I called BMO, they acknowledged the problem and said the account would be corrected immediately to make the last deduction correct. They did that on Tuesday! I was told the problem would be correct with each payment from now on. We'll see how that goes, but so far so good.

Thanks

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