The inept launch of new tax-filing rules by the Canada Revenue Agency started with good intentions.
The CRA wants to reduce tax evasion and money laundering. As part of this effort, it’s asking taxpayers this year, for the first time, to provide information on a variety of assets where one person is a beneficiary and another is a trustee who manages things. This could include people who are joint holders of bank or investment accounts with their parents, and were added to help run the accounts.
Arrangements such as these are called bare trusts. To disclose one to the CRA, you must file a Trust Income Tax and Information Return and a T3 Schedule 15. Good luck with that.
My colleague Erica Alini recently looked at the complexities faced by people who attempt to file these forms on their own, and the difficulties of finding an accountant. One piece of good news to add here is that H&R Block says it has people who can file T3s for clients. The cost starts at $150.
An important thing to note about bare trust reporting is that there should not be any tax owing as a result. The purpose of this exercise is to gather information only. “It’s disclosure,” said Pam Prior, a tax partner at KPMG in Vancouver.
Ideally, the CRA would have assembled a plain-language information package for Canadians about the new measures, to explain who is affected and how to proceed in providing the requested details. A simplified T3 for bare trusts would also have been a nice touch.
What we have instead is a five-page T3 return suitable for all the various kinds of trusts, a term used to describe arrangements where assets are managed by a trustee to benefit one or more beneficiaries.
Ms. Prior points out that there is a CRA guide to filling out the T3, but it’s quite technical. On page 29 of this 86-page PDF document, available for download on the CRA website, there are instructions for filing information on bare trusts. Step 1 is to select “code 307,” while Step 2 is to send a copy of something called the “trust document,” if this is the first year of reporting to the CRA. Insert eyerolls here, because bare trusts often have no paper documentation.
In CRA-land, bare trusts are part of a constellation of trusts that broadly includes testamentary trusts, inter vivos trusts and public trusts. But for taxpayers, it has been a shock to find out that arrangements made to help families manage their finances must now be disclosed to the CRA.
Please see the next part of the article in our next post.
Source:
ROB CARRICK PERSONAL FINANCE COLUMNIST
PUBLISHED MARCH 4, 2024
UPDATED MARCH 5, 2024
The Global Mail
*The preceding information is for educational purposes only. As it is impossible to include all situations, circumstances and exceptions, a further review should be done by a qualified professional. No individual or organization involved in either the preparation or distribution of this text accepts any contractual, tortious, or any other form of liability for its contents.
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