Principal Issues: In her report of November 2005, the Auditor-General of Canada suggested that the CRA does not have enough information to adequately assess the tax at risk for trust returns. That report contained a number of recommendations to the CRA, including:
a. requiring trusts to submit a statement of assets and liabilities with their trust returns;
b. evaluating the tax risks in domestic trusts when it selects trusts for review; and
c. ensuring that there is proper reporting of trust income allocated to beneficiaries on information slips.
What steps has the CRA taken in addressing the comments of the Auditor General in the November 2005 report?
Position: Further to our response at the 2006 STEP Conference the CRA is still in the process of identifying the nature and extent of non-compliance issues related to trusts, considering options to ensure proper reporting of income and analysing the impact of requiring trusts to include a statement of assets and liabilities with the T3 Trust Income Tax and Information Return. We continue to meet with internal stakeholders to assess the usefulness of a statement of assets and liabilities, the extent of the burden that this requirement would have on taxpayers and the CRA, and the value of imposing different requirements for different types of trusts. The analysis and consultations are still ongoing. We also noted that a T3 Trust Income Tax and Information Returns is not considered correctly filed unless it includes both the T3 summary and income tax portions of the return (where income has been allocated to beneficiaries).
2007 STEP Round Table
Q 16. Follow-Up to 2005 Auditor-General Report on Trusts
In her report of November 2005, the Auditor-General of Canada suggested that the CRA does not have enough information to adequately assess the tax at risk for trust returns. That report contained a number of recommendations to the CRA, including:
a. requiring trusts to submit a statement of assets and liabilities with their trust returns;
b. evaluating the tax risks in domestic trusts when it selects trusts for review; and
c. ensuring that there is proper reporting of trust income allocated to beneficiaries on information slips.
What steps has the CRA taken in addressing the comments of the Auditor General in the November 2005 report?
Response
Further to our response at the 2006 STEP Conference the CRA is still in the process of identifying the nature and extent of non-compliance issues related to trusts, considering options to ensure proper reporting of income and analysing the impact of requiring trusts to include a statement of assets and liabilities with the T3 Trust Income Tax and Information Return. We continue to meet with internal stakeholders to assess the usefulness of a statement of assets and liabilities, the extent of the burden that this requirement would have on taxpayers and the CRA, and the value of imposing different requirements for different types of trusts. The analysis and consultations are still ongoing.
In the context of this question, we have been asked to bring to your attention an issue concerning the T3 Trust Income Tax and Information Return. Over the last few years, CRA has been receiving T3 Summary and related Information Slips without the related Income Tax Return portion of the Return. We would like to remind the industry that in order for the T3 Trust Income Tax and Information Return to be complete and filed in the prescribed manner, both the T3 Summary and Income Tax Return are required to be filed.