What’s New with Trusts in 2021?
For 2021 and subsequent tax years, Budget 2018 proposed a new reporting obligation that requires express trusts to report the identity of all trustees, beneficiaries, and settlors of the trust. These changes are being made to improve the collection of ownership information to help Canada Revenue Agency assess the tax liability for trusts and its beneficiaries.
As a consequence, clients with existing trusts must fill out a form to submit this
information to Canada Revenue Agency. We have created a disclosure form to help summarize the information needed. This disclosure form can be downloaded at: https://www.lohncaulder.com/checklists. Completed forms should be sent to Lilian Tseng at email@example.com. Of course, if we prepare the individual tax returns of all the trustees, beneficiaries, and settlors of the trust, then we would already have this information.
2021 T3 Trust Tax Returns
We are writing to remind you that it will soon be time to file your family trust tax return for 2021. All family trusts must report their income and disbursement activity for the 2021 calendar year by no later than March 31, 2022.
This deadline is applicable to all family trusts, and there are penalties for failing to file on time.
For family trusts that hold private corporation shares, the practical deadline is actually much earlier: February 28, 2022. This is because corporations must report any dividends paid on such shares on T5 slips, and these T5s must be filed by the end of February. Quite often, the cash-flow through trusts “drives” the quantum of dividends that the corporation has to report, and there is sometimes a bit of bookkeeping involved.
With a deadline this tight, we need your help!
To get so much done in such a short period of time, while keeping your accounting fees to a minimum, we ask that you please summarize the following for us:
- The amount of cash paid into the trust for each month of calendar 2021.
- The amount of cash paid out from the trust to each of the beneficiaries for those months.
To assist you in reporting such information to us, we have prepared a transaction summary form for you to fill in and send back to us.
The transaction summary can be downloaded at: https://www.lohncaulder.com/checklists
An Excel spreadsheet version is provided, which allows you to enter data, and have the sums automatically done for you. Alternatively, a PDF version is available if you would like to fill out the form manually.
Once completed, you can return the form to us by one of the following options:
- Return e-mail (please send to firstname.lastname@example.org);
- Over the Internet, to our secure web portal. Please go to the ‘Portal’ link on the front page of our website https://www.lohncaulder.com/, or contact email@example.com for invitation access to Portal;
- Fax (604-688-7228); or
If you are unable to prepare the transaction summary, please send us your January-to- December 2021 trust bank statements and cancelled cheques, so that we can prepare the summary for you. For these situations, it will also be necessary to identify for us the particular beneficiary for whom a payment to a third party was made.
We will compare your transaction summary to the information in your corporate records, and will optimize the allocation of the income of the trust into one of two categories:
- New 2021 calendar dividends or other payments, and, if applicable,
- Tax-free distribution of capital from previous years.
Lilian Tseng of our office is in charge of T5s and T3s—please contact her if you have any questions. Lilian’s email is firstname.lastname@example.org, and her direct dial telephone is 604-699-3361.
Thank you in advance for your help!