Interest adjustments and penalties

Sometimes an individual may withdraw funds from an investment contract after receiving T5 slips for a number of years. Withdrawing funds can often mean an early redemption penalty, which lowers the interest rate you previously calculated on the investment contract. As a result, the actual interest you pay to the recipient is less than the total of the accrued interest reflected on the T5 slips you issued to the recipient in previous years.

In such cases, do not issue a "negative" T5 slip or amend the slips for previous years. Under subsection 20(21), the recipient is entitled to deduct, in the year in which the investment was disposed of, the excess interest previously included in income.