Investors who hold mutual funds or ETFs may have to wait for their T3 tax slips
Taxpayers could receive T3s and other tax slips later than normal as a result of the CRA’s change in administering the capital gains policy.Justin Tang/The Canadian Press
Investors could receive T3 slips for their investment funds later than usual this year as some investment fund firms review the documents to ensure they’re reporting the correct amount of capital gains to unitholders.
Many investment fund firms had been preparing T3 slips based on the federal government’s proposed increase to the capital gains inclusion rate and the Canada Revenue Agency’s guidance that it would administer the changes even though they weren’t yet law.
However, following Ottawa’s Jan. 31 announcement that it would defer the implementation of the higher 66.7-per-cent rate to Jan. 1, 2026, the CRA said it would revert to administering gains under the existing 50 per cent inclusion rate.
As a result, investment fund firms that had calculated gains on T3 slips based on the proposed rules are now “review[ing] all of their funds to determine whether they have overdistributed [gains],” says Josée Baillargeon, director of taxation policy with the Investment Funds Institute of Canada in Toronto.
“If an overdistribution is identified, they will make the appropriate corrections, if necessary.”
Ms. Baillargeon also says “firms will most likely need more time to issue T3 slips to complete all of the activities required to ensure the accuracy of the information.”
The usual deadline for issuing T3 returns is March 31. Due to the late reversal in administrative policy, the CRA has given trusts, including mutual fund trusts and exchange-traded funds, reporting a capital disposition until May 1 to file 2024 T3 returns and information slips without incurring late-filing penalties.
Peter Bowen, vice-president of tax and retirement research for Fidelity Investments Canada ULC, says the firm already corrected the capital gains distributions for the “small number” of its funds affected by the CRA’s change in policy.
“Fidelity’s T3 slips are in the process of being issued, so there is no concern about missing the deadline for issuance of slips,” he stated in an e-mail to the Globe.
Murray Oxby, vice-president of corporate communications at CI Global Asset Management, says the firm hasn’t issued T3 slips yet, so no revisions are required.
“We do not currently anticipate any delays in issuing T3 slips as a result of the change,” he stated in an email.
CIBC Asset Management Inc. is reviewing T3 slips for its funds and also doesn’t expect any delays, said Stephanie Marcus, senior consultant, public affairs, in an email.
What this means for clients’ tax returns
The CRA has given taxpayers reporting a capital disposition in 2024 until June 2 to file a 2024 tax return without incurring interest or late-filing penalties. The deadline for filing an individual T1 return is April 30.
Taxpayers could receive other tax slips later than normal as a result of the CRA’s change in administering the capital gains policy, says Ryan Minor, director of tax for CPA Canada in Sudbury, Ont.
For example, the CRA has given issuers until March 17 to issue the T5008 (securities transactions) and the T4PS (employee profit-sharing allocations) without penalty. The usual deadline is Feb. 28.
The tax agency has also given issuers until March 7 to issue the T4 (remuneration paid), T4A (pension and other income) and the T5 (investment income) without penalty. These effective filing extensions from the usual Feb. 28 deadline are due to CRA systems issues, Mr. Minor says.
In an e-mail to the Globe, Emily Mantle, a chartered professional accountant with Compass CPA in Sudbury, Ont, says affected clients should monitor updates from their fund firms and consider waiting to file their return “until they have received all their correct income slips to avoid the need for a T1 adjustment later.”
If a taxpayer receives a corrected information slip after filing, they should amend their return as soon as possible to avoid interest and penalties, Ms. Mantle says.
“Penalties increase for repeat offences,” she says. “Even minor oversights in one year can impact a future year on a significant basis.”
Mr. Minor says affected taxpayers should still try to file returns by April 30, despite the CRA’s filing relief announcement. The CRA hasn’t yet provided detailed information about who is eligible for the relief, he says.
“If you have all your slips and everything is in order, go ahead and file,” Mr. Minor says.