Although specific deadlines are determined by the trust's taxation year-end, typically within 90 days after the end of the trust's fiscal period, it is crucial to understand the possible penalties related to late filing, failure to file, or filing with inaccurate information.
Understanding Penalties for Non-Compliance
Failure to submit a T3 return on time incurs a late-filing penalty. This penalty is 5% of the unpaid tax at the filing deadline, plus an additional 1% for each full month of delay, capped at 12 months. For cases involving a previous late filing, the penalty may rise to 10%, with 2% added for each subsequent month, up to a maximum of 20 months. Trusts with no taxes due face an alternative penalty of $25 per day, ranging from $100 to a maximum of $2,500. Additional penalties may apply if the trust knowingly fails to file, especially if it's not a listed trust.
For false statements or omissions, non-listed trusts may incur penalties equal to the greater of $2,500 or 5% of the highest fair market value of trust property during the year. A further penalty may apply, ranging from $100 to 50% of the understated tax related to the false statement or omission. Listed trusts face penalties of $100 or 50% of the understated tax and overstated credits.
Failure to distribute or file trust-related information slips on time can result in penalties of $25 per day, with a minimum of $100 and a maximum of $2,500. Conviction for not filing a T3 return or slip can lead to fines ranging from $1,000 to $25,000 or imprisonment for up to 12 months. Starting January 1, 2024, trusts filing more than 5 information returns of the same type must file electronically. Failure to do so incurs penalties based on the number of incorrectly filed returns, with each slip considered an information return.
Additional Resources
In essence, timely and accurate submission of T3 Trust Returns is vital for trustees, beneficiaries, and settlors, especially in light of recent changes in reporting standards emphasizing transparency and compliance. Given the intricate nature of trusts, seeking professional guidance is strongly recommended.
Book a free consultation with us today, so you don't have to navigate the T3 trust return alone.