What Is a T3 Income Tax Form?

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A T3 slip is a Canadian tax form that reports income from trusts for a tax year. An individual taxpayer will include the amounts reported on the T3 on his personal tax return. A corporation, on the other hand, will include it as part of its investment income. A trust is required to mail out or otherwise send the T3 slip to investors by the last day of February in the following year.

What is a T3 Used For?

  • A T3 slip is sent out by a trust to investors. It details the various types of income distributed from the trust for a taxation year. The most common reason that individuals will receive a T3 slip is for distributions or dividend reinvestments in mutual funds or segregated funds. If the funds are held in tax-deferred retirement or education accounts, no T3 will be generated. The income in those types of funds is reported only for tax purposes when withdrawn from the fund. The trust must file a copy of all T3 slips along with a T3 Return to Canada Revenue Agency by the end of February.

Understanding the T3 Slip

  • The most common types of income distributed by a trust and reported on a T3 are dividends and capital gains. However, a trust can distribute many different kinds of income, such as interest, royalties, business income and pension income. Each is recorded on a separate line on the T3 slip. Each type of income is treated differently for tax purposes and appears in a separate location on the taxpayer's personal income tax return. Capital gains may be offset by other capital losses in the year or from prior years.

Filing a T3

  • A T3 is filed as part of a taxpayer's T1 personal tax return. Regardless of the fiscal year end of the trust, the T3 is generated and reported in the year the income is received. If the income tax return is being filed manually, one copy of the T3 slip is attached to the tax return and the other two copies are retained by the taxpayer and tax preparer. If the return is being filed electronically, all copies are kept by the taxpayer and tax preparer, and must be made available if the Canada Revenue Agency asks to see them.

Penalties for Late Filing

  • The penalties for missing a T3 or for filing late are the same as the general penalties for filing a personal tax return late. The tax return is due April 30 of the following year or June 15 if the taxpayer is self-employed. All taxes owing, including those generated from T3 income, are due on April 30 regardless of the filing date.

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