Last week we reminded you of the penalties for late filing your tax return, and also the significant penalties for omitting information slips or failing to disclose all sources of income. This includes capital gains on investments that were sold during the year.
A number of people have asked me, “What is the difference between a T3, T5 and T5013 slip, and what about the other paper received from my investment company?”
A T3 slip is an information return issued by a trust. Most common are T3s issued by mutual funds, most of which are legally trusts. On the other hand, mutual fund corporations issue T5s.
Less common are T5013 slips, issued by limited partnerships to owners of partnership units.
Unfortunately, the CRA mailing deadline for T3s and T5013s is March 31, which can hold up your application for refund.
A T5 slip is a Statement of Investment Income, which you receive from banks, credit unions, investment firms and other entities that pay you interest, dividends or royalties. They are not usually issued for amounts less than $50, but you are still responsible for reporting those amounts.
T5s are mailed by February 28. If you don’t have them by now, you might contact your investment rep or financial institution, to see if one is going to being issued.
In the case of mutual funds, sometimes there is no taxable distribution in the year and therefore no T5 or T3 slip issued.
One more thing to be careful about is that some companies have decided to issue the tax info for several of their mutual funds on one slip. If you only enter the first set of numbers into your return (as I did last year), you will be reassessed and you will use up your one allowable omission before penalties are assessed. This is true even if the omission is $6.54, as was my case.
Investment dealers also issue Trading Summaries, which remind you about all investments purchased and sold during the year. The formats are different, and some institutions show you the cost of new investments purchased, which you need to track for the future.
All summaries will tell you about investments you sold, but not all will tell you your cost basis, which you (or your accountant) require in order to calculate your capital gain or loss.
Don’t forget the T4 family - T4, T4A, T4A (OAS), T4A(P) - for CPP benefits – T4E (EI benefits), T4 RIF and T4 RSP, for withdrawals from registered plans.
Finally, some good news
It was announced last year that disclosure and filing detail requirements for people with foreign investments would be expanded enormously. Tax returns always asked, on page 1, if you have property or investments outside Canada with an original cost of greater than $100,000, but this was a yes or no question. If yes, further detail was required on form T1135, the Foreign Income Verification Statement.
For 2013, the T1135 must now include the name of the institution holding your funds (which could be your Canadian investment company), the country where each security or investment ultimately resides (for example, US shares), and the income generated from each security, account or property.
Some of these income amounts are already included on the other information returns mentioned above, so avoid duplication.
Still waiting for the good news?
Exempted from this requirement are securities held in registered accounts and personal use foreign real estate that does not produce rental income.
The really good news is that on February 26, 2014, the government announced a transition rule for 2013 that allows you to simply report the combined fair market value of all such specified foreign property that is in a Canadian securities dealer account. They have updated and simplified form T1135 to comply and, for 2013 only, extended the T1135 filing deadline to July 31, 2014. It is usually required with your return.
We’ll see if the individual requirement to report foreign securities held with a Canadian investment firm will persist over the long haul considering that information is already reported to CRA by the investment firms.
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Dollars and Sense is meant as an introduction to this topic and should not in any way be construed as a replacement for personalized professional advice.
Please consult legal, tax and investment experts for advice on your unique situation.
David Christianson, BA, CFP, R.F.P., TEP, CIMis a financial planner and advisor with Christianson Wealth Advisors, a Vice President with National Bank Financial Wealth Management, and author of the book Managing the Bull, A No-Nonsense Guide to Personal Finance.