The program includes the T3 Trust Income Tax and Information Return, Schedules 1 to 12, the provincial T3 forms, the T3 Summary and the T3 slips.
To prepare the tax return of a trust, as well as the slips that will be issued to the beneficiaries, proceed as follows:
Beneficiaries Identification
From the T3 data entry screen, identify each beneficiary by entering his social insurance number or business number, his name and address, his status (resident, non-resident, preferred), the type of slip (original, amended) and the type of beneficiary (individual, joint account, corporation, association, government). Also specify each beneficiary’s share of the trust income. Two alternatives are available to do so:
Check "Even" if each beneficiary is entitled to an equal share of the trust’s income.
Check "%" and specify each beneficiary’s share if the trust’s income is not allocated equally amongst the beneficiaries.
Note: The software supports a maximum of 20 beneficiaries. To create a beneficiary, press Shift+Ctrl+F4 or use the Multiple Copy toolbar. To move from one beneficiary to another, press the Ctrl+Tab and Shift+Ctrl+Tab keys or use the Multiple Copy toolbar.
Trust Identification
Then, go to Form Client Identification and Other Information (Jump Code: ID) and identify the trust: name, address, province of residence, type of trust, taxation year, etc. Also answer the other questions at the top of page 2 of the T3 return.
Income of the Trust
Then, enter the trust’s income on the return or the applicable schedule, based on the type of income in question (for example, pension income on line 2 of the return, net business income on line 6 of the return, capital gains on Schedule 1, investment income on Schedule 8).
Allocation to Beneficiaries
Schedule 9 provides the details of the amounts allocated to beneficiaries. Expenses incurred by the trust to earn its income (entered on line 40 of the return) may be allocated based on the sources of income in the first section at the top of the screen.
If all or a portion of the income or capital gains must be taxed in the trust, go to the second section, answer YES to the applicable question and enter the amount that must be taxed at the trust’s level. Only the excess of the trust’s income will be allocated to the beneficiaries and taxed in their hands.
Parts A and B of Schedule 9 provide the allocation of the amounts paid to beneficiaries. Amounts can not be entered in these parts.
Note: In some cases, the amount to be allocated must be entered by the user in Schedule 9. This is the case for lines 924, 933, 934, 935, 940, 941, 942, 945, 947 and 948.
In addition, Cantax FormMaster generates the footnotes that must appear on the slips issued to the beneficiaries. In the case of lines 921-3 and 926-3, the user must enter the amount that will be used to generate the footnotes.
Slips and Summary Form
The T3 slips are generated automatically by Cantax FormMaster based on the information entered on the T3 data entry screen and the income allocations on Schedule 9. The T3 Summary gives the total amounts from the slips.
Federal Tax
Federal tax is calculated on Schedule 11 based on the income that is taxed in the trust and the type of trust. If dealing with an inter vivos trust, indicate if it is a grandfathered inter vivos trust by answering the question on page 1 of Schedule 11. Explanations regarding what a grandfathered inter vivos trust is can be found on page 2 of Schedule 11.
Provincial or Territorial Tax
The provincial or territorial tax payable by the trust is calculated on the applicable form based on the trust’s province or territory of residence entered on page 1 of the return.
Cantax FormMaster includes the forms enabling you to calculate a trust’s provincial or territorial tax with respect to each territory and province, except Quebec. In the latter case, you must prepare a distinct return (Form TP-646-V), which is not included in Cantax FormMaster but is available in Taxprep for Trusts.
Most of the lines on the different provincial and territorial forms are calculated by the software based on the trust’s province of residence, as shown on page 1 of the T3 return. Some specific credits, notably the political contributions credit, require data to be entered on the applicable provincial or territorial form. Always make sure to attentively review the form before printing it and submitting it to the CRA.
2021 Calculations
Cantax FormMaster allows you to calculate the tax payable by a trust having an off-calendar taxation year-end. By entering a year-end date in 2021, the federal, and provincial or territorial tax will be calculated based on the 2021 rates. However, please note the following warnings:
- The rates used for 2021 are those that were known at the time the software was updated, i.e., January 2021. Federal, provincial and territorial budgets tabled after this date may contain changes to the tax rates. Before using Cantax FormMaster to prepare a 2021 trust tax return, you should check if the rates have changed. If needed, override the amounts calculated by the software.
- The forms included in Cantax FormMaster have been approved by the CRA only for use with the 2020 year. The calculations for the 2021 year are nonetheless provided in case the trust’s tax year differs from the calendar year. However, these forms cannot, under any circumstances, be used with respect to a tax year ending on December 31, 2021. In such a case, you must use the 2021 forms, which will be included in version 1.0 of Cantax FormMaster 2021.
See Also