2023 Tax Reporting Guide for BMO Nesbitt Burns

If you owe income tax to the Canada Revenue Agency (“CRA”) or Revenu Québec, your tax return and any balance owing must be submitted by the April 30, 2024 deadline, to avoid late-filing penalties and interest charges.

For self-employed individuals, the income tax filing deadline is June 17, 2024; however, any balance owing must be paid by April 30, 2024 to avoid late-filing penalties and interest charges.

The Registered Retirement Savings Plan (“RRSP”) contribution deadline for the 2023 tax year is February 29, 2024.

RRSP annuitants can contribute to their own RRSP until December 31 of the year in which they turn 71 years of age.

Depending on your investment holdings and account activity, you could receive a variety of tax slips that you’ll need to prepare your annual tax return. For a brief overview of the various tax slips and supporting documents you may receive from BMO, along with their expected availability dates, refer to our publication, 2023 Tax Documents Overview and Schedule.

Please make sure that you receive all required tax slips before filing your tax return with the Canada Revenue Agency, and Revenu Québec for Quebec residents, to prevent having to file an amendment.

Please note: Depending on your document delivery preference, your tax documents will be posted on BMO Nesbitt Burns Gateway® and/or placed in the mail as soon as they are available. If you’re not already registered to access your tax slips exclusively online, please speak with your BMO Nesbitt Burns Investment Advisor, or register directly via the Gateway sign-in page.

T4RSP/RL-2 Slips

Reports income from any withdrawals, including applicable withholding taxes from any Registered Retirement Savings Plan.

T4RIF/RL-2 Slips

Reports income from any Retirement Income Fund plan (“RIF”) withdrawals, including applicable withholding taxes.

T4A/RL-1 Slips

Reports Educational Assistance Payments made to the beneficiaries of a Registered Education Savings Plan (“RESP”) and/or Accumulated Income Payments (“AIP”) paid to the subscriber during the tax year.

T4FHSA/RL32 Slips

Reports contributions, qualifying and taxable withdrawals, income tax deducted and transfers from a First Home Savings Account (“FHSA”) into a Registered Retirement Savings Plan or another First Home Savings Account.

T5/RL-3 Slips

Reports income from your non-registered investments, which may include stocks, bonds, dividends, interest, and any foreign income.

Please note: Tax slips for any mutual fund corporations and BMO High Interest Savings Accounts held in a BMO Nesbitt Burns non-registered account will be sent directly by the respective fund company.

T3/RL-16 Slips

Reports income on investments held in non-registered accounts, including Canadian-based Real Estate Investment Trusts (“REITs”), income trusts, Exchange-Traded Funds (“ETFs”), capital trusts and mutual fund trusts.

Please note: Tax slips for any mutual fund trusts held in a BMO Nesbitt Burns non-registered account will be sent directly by the respective fund company.

T5013/RL-15 Slips

Reports the allocation of income from limited partnerships to the Canadian resident partners.

Saskatchewan Mineral Exploration Tax Credit (“SMETC”) Slip

The SMETC slip is provided to Saskatchewan taxpayers who invest in eligible flow-through shares issued by mining or exploration companies.

T5008/RL-18 Slips

Details security positions that were sold, bought, redeemed, or matured in a non-registered accounts during the tax year and assists with calculating capital gains/losses for tax reporting purposes.

Canadian residents outside of Quebec will receive a T5008 Tax Summary Slip. Residents of Quebec will receive a “T5008/RL-18 Combo Summary slip” which combines Federal and Quebec tax reporting information.

The T5008/RL-18 Combo Summary slip includes the following information:

• Page 1 provides the taxpayer’s personal information (name, address, etc.);
• Page 2 provides instructions for the T5008/RL18 Combo Summary slip; and
• Page 3 and subsequent pages include details on securities depositions.

A taxpayer must report all the transactions reported on the T5008, or combination T5008/RL18 for residents of Quebec, on their income tax return.

NR4 Slips

For non-residents of Canada, all payments and withholding taxes will be reported on an NR4 tax slip(s). NR4s are issued by income classification (e.g., trust, corporate non-registered/registered plans). A non-resident who receives both trust and corporate income distributions will receive a separate NR4 for each income type.

Form 1042-S: Foreign Person’s U.S.-Source Income Subject to Withholding

This form is issued to non-U.S. persons that are beneficial owners of flow-through entities with reportable U.S.-source income and withholding tax. These forms are filed with the Internal Revenue Service (“IRS”).

Form 1042-S: Effectively Connected Income from U.S. Limited Partnerships

Non-U.S. partners who received U.S. Effectively Connected Income from a U.S. Limited Partnership are required to report this income to the IRS. To fulfill this tax reporting obligation, the income must be reported using Form 1042-S.

To request a Form 1042-S from BMO, please speak with your BMO Nesbitt Burns Investment Advisor. The 1042-S will include the amount of the payment(s) you received from the U.S. limited partnership(s) that distributed U.S. Effectively Connected Income and the amount of 1446(a) and/or 1446(f) tax that was withheld and submitted by BMO to the IRS.

1099 Official Package: For Qualified Intermediaries (“QI”)/U.S. Persons

The following forms are issued to U.S. persons with income that is required to be filed with the Internal Revenue Service:

• 1099-DIV (Dividends and Distributions): Reportable dividends paid to U.S. persons.
• 1099-INT (Interest Income): Reportable interest paid to U.S. persons.
• 1099-B (Proceeds from Broker and Barter Exchange Transactions): Reportable proceeds from sales or redemptions of securities, issued to U.S. residents.
• 1099-MISC (Miscellaneous Income): Reportable U.S. income not included in any of the above forms (such as U.S. royalty income).
  

Schedule K-1

Effective as of the 2023 tax year, non-U.S. partners holding a U.S. Limited Partnership will receive a Schedule K-1 tax form. The K-1 reports the partner’s earnings, losses, dividends, capital gains, etc.

A non-U.S. Limited Partnership that has U.S.-source income, but no Effectively Connected Income is only required to issue a Schedule K-1 if there were one or more U.S. Limited Partner(s) during its taxable year. In this case, the partnership would issue the Schedule K-1 to its direct U.S. Limited Partner(s), as well as any U.S. Limited partner(s) who hold any interest in the Limited Partnership through a flow-through entity.

RRIF/LIF/LRIF/RLIF/PRIF Evaluation Letter

Approximate mailing date: Late January
Please note: This document is not made available online.
Details included in the Evaluation Letter

• Value of your assets on December 31, 2023;
• Minimum amount that must be withdrawn during 2024;
• Maximum amount that can be withdrawn if you have a Life Income Fund (“LIF”), Locked-in Retirement Income Fund (“LRIF”), Registered Retirement Income Fund (“RRIF”), Prescribed Retirement Income Fund (“PRIF”) and/or a Restricted Life Income Fund (“RLIF”); and
• Your desired payment amounts and frequency.

Summary of 2023 Tax Slips

Approximate mailing date: Early February

This summary details the tax slip(s) that you will receive for the accounts you hold at BMO to help ensure that you do not file your tax return before receiving all your BMO tax slips. The summary lists all your T3/RL16, T5/RL3 split shares and T5013/RL15 eligible securities holding(s) for which you will be receiving tax slips between late February and late March.

Additionally, the Summary includes an overview of tax receipts and the expected delivery dates of the T5/RL3/NR4 (regular equity and split share or debt instruments), T3/RL16/NR4, and tax slips from fund companies and High-Interest Savings Accounts (“HISA”).

Foreign Securities Report
Approximate mailing date: Early February

As a Canadian resident, you are subject to Canadian income tax obligations on worldwide income from all sources. You must file a CRA T1135 Form (Foreign Income Verification Statement), if at any time during the tax year, the total cost amount of all your specified foreign property was more than CAD$100,000.

The Foreign Income Information Statement provides a listing and value of all your foreign security holdings at BMO Nesbitt Burns. This is not an official tax document and is provided to assist you in determining if you have a CRA Form T1135 filing requirement.

Realized Gain/Loss Report
Approximate mailing date: Mid March

This report provides the realized gains and/or losses of your securities held across all your BMO Nesbitt Burns non-registered accounts. This report will be mailed to you in mid-March and is not an official tax report.

Please note: There may be differences between the adjusted cost base (“ACB”) on the Realized Gain/Loss Report and your T5008/RL18 tax slip(s). This discrepancy occurs because the T5008/RL18 does not consider any return of capital from a security that was sold by the accountholder during the year. However, the Realized Gain/Loss Report reflects the ACB for the security, based on the return of capital reported on your T3/RL16 and T5013/RL15 tax slips.

Registered Estate Tax Slips

Based on the registered account, tax slips are issued that reflect the pre- and post-date-of-death payments. Form RC249 Post-Death Decline in Values is also issued when applicable and filed with regulatory agencies.

You may receive NR4, T3/RL-16, T4A/RL-1, T4RSP/RL-2, or T4RIF/RL-2 tax slips for any income the estate account has earned. There are optional returns that you may file to reduce the tax liability for the deceased. For more information on how to correctly report and file estate tax, please work with your tax advisor.

Foreign Exchange Conversions (Tax Slips and Gain/Loss Report)

All amounts must be converted into Canadian currency when filing your income tax return. Please note that there may be differences between the amounts reported on your tax slips and the Gain/Loss Report. This occurs because certain tax slips are issued in the native currency of the investment, whereas the Gain/Loss Report is issued in Canadian dollars.

Tax information is provided based on your preference (i.e., either mailed or provided online through your BMO Nesbitt Burns Gateway® account). Contact your BMO Nesbitt Burns Investment Advisor to obtain a duplicate copy of your tax slip(s) and any associated income reports and statements.

In the event you discover any issues with the financial and/or non-financial information reported on your tax slips, notify your BMO Nesbitt Burns Investment Advisor immediately. Your Investment Advisor will investigate and ensure that you receive an amended tax slip, if applicable. We will also update our systems with the correct information and file any applicable amendments with the appropriate revenue agency.

Immediately inform your Investment Advisor when your residency status changes between countries, or when your residency status changes between being a resident/non-resident of Quebec (if you are re-locating within Canada). When the residency change is made in our systems, all distributions received as of, and after, the date the residency is changed, will appear on the appropriate tax slip (e.g., Canadian T-slips, Quebec Relevé slips, or NR4 slips) and with the correct withholding tax, when applicable.

Tax slips are issued to the primary accountholder and include the primary account holder’s Social Insurance Number (“SIN”) and Legal name. Where applicable, the joint account holder’s SIN and Legal name are also included.

It is the responsibility of each accountholder of a joint account to report their individual portion of total income according to the original contribution to the investments.

Informal Trusts, or In-Trust-For Accounts, are considered complex trusts from a legal and tax perspective. These accounts are used to set aside funds for a minor child, typically for future education expenses. However, In-Trust-For accounts lack formal trust documentation.

For tax purposes, a trust is considered a (individual) taxpayer, which entails several tax filing requirements with which the Trustee(s) (i.e., the person holding and administering the Trust) must comply. The tax slip(s) are to be issued in the ‘name and SIN’ of the Trustee, and not the beneficiary(s).

A foreign spin-off is a distribution by a foreign corporation in the form of shares of a different corporation. Foreign spin-offs are treated as a taxable foreign dividend for Canadian tax purposes. Section 86.1 of the Income Tax Act allows for certain tax elections that defer your tax liability until the original shares and the spin-off shares are disposed of. A T5/RL-3 tax slip will be issued to report the foreign spin-offs.

For more information on eligible foreign spin-offs from BMO, refer to our publication, Tax Deferral for Foreign Spin-Offs

You may also refer to Eligible spin-offs published by the CRA, for a list of spin-offs that have been approved by the CRA.

Please speak to your accountant or other tax advisor to confirm the tax cost base of your investments reported in Box 20 of the T5008/RL-18. In addition, keep a history of account statements/transactions to make any necessary adjustments to the cost base in order to determine the correct gains or losses on your investments.

The tax cost base may be different from the original purchase price and information available to BMO at the time of preparing this form due to various reasons, including: corporate re-organizations, tax elections, and distributions (such as return of capital); the requirement to calculate, for tax purposes, a weighted-average cost of a security that is held across more than one non-registered account, including accounts held with other financial institutions; or due to other factors such as foreign exchange, immigration, superficial losses, etc.

If the sale of a security creates a capital loss for the client, the CRA may consider the transaction a ‘superficial’ loss and disallow any capital loss deduction if the same security was purchased during the period starting 30 calendar days before the sale and ending 30 calendar days after the sale. If the security that was disposed of at loss is held within a registered account, it will not realize a superficial loss.

For additional information please refer to the CRA’s publication, What is a superficial loss?

Tax slips are not issued for Tax-Free Savings Accounts (“TFSA”). Income earned in, or withdrawn from, a TFSA is not taxable unless you exceed your contribution limit. Any excess contribution made over the contribution limit will be subject to a 1% penalty per month for every month the excess amount remains in the account.

Calculating TFSA Contribution Room

Any unused TFSA contribution room automatically rolls-over from the previous year(s) into the following year. Clients can contribute up to the TFSA dollar limit for the current year, plus:

• Any previously unused contribution room; and
• Up to any amount they withdrew in the previous year.

Only contributions made to a TFSA account with a valid Canadian SIN on file are accepted as TFSA contributions.

Non-residents may continue to maintain a TFSA but cannot make any new contributions. You should confirm your annual TFSA contribution limits with the CRA by using their “My Account” application, or by calling the Tax Information Phone Service (“TIPS”) at 1-800-267-6999.

The First Home Savings Account (“FHSA”) is a new registered plan that enables prospective first-time home buyers with the ability to contribute up to $40,000 over the life of the plan –capped at contribution limit of $8,000 per year –toward saving their first home, tax-free. Contributions made to an FHSA are tax-deductible and the income earned in the account is tax-free. Additionally, qualifying withdrawals to purchase a first home are non-taxable.

Features of the FHSA:

• The lifetime limit on contributions is $40,000, with an annual contribution limit of $8,000. Unused portions of the annual contribution limit can be carried forward to future years. There is a penalty of 1% per month on excess contributions.
• Contributors may choose which year to deduct their FHSA contribution(s) (e.g., it does not have to be the year in which the contribution was made).
• An individual may transfer funds from an FHSA to another FHSA on tax-free basis.
• Funds from an RRSP to an FHSA can be transferred on a tax-free basis, subject to the FHSA annual and lifetime contribution limits and the qualified investment rules.
• On the breakdown of a marriage or a common-law partnership, an amount may be transferred directly from the FHSA of one party in the relationship to an FHSA, RRSP, or RRIF of the other. In such circumstances, transfers will not re-instate any contribution room of the transferor and will not be counted against any contribution room of the transferee.
• A spouse or common-law partner can be designated as the successor account holder, in which case the account can maintain its tax-exempt status.
• For non-residents of Canada, taxpayers can continue to participate in an FHSA, but they cannot make contributions or qualifying withdrawals. Withdrawals by non-residents are subject to withholding tax.

The annual contribution period for the First Home Savings Account (“FHSA”) is January 1 to December 31. For the 2023 tax year, contributions made to the FHSA between April 1, 2023, and December 31, 2023, can be deducted on your 2023 income tax and benefit return.

Further information on the FHSA and contribution room can by confirmed with the CRA by using their “My Account” application, or by calling Tax Information Phone Service (“TIPS”) at 1-800-267-6999.

A Canadian Tax Identification Number refers to the following:

• Social Insurance Number (“SIN”) for individuals;
• CRA Business Number and Quebec Enterprise Number for entities (i.e., Corporations, partnerships, associations etc.); and
• Trust Number for formal trusts/estates.

A recipient identification number is a mandatory Tax Identification Number and must be included in information returns. Financial Institutions must make a reasonable effort to obtain the recipient’s Tax Identification Number and report it on the information returns.

CRA Business Number

• The CRA Business Number is a unique, nine-digit number and the standard identifier, unique to a business or legal entity.
• Your CRA Business Number can be obtained by logging into your CRA My Business Account. 
• For additional information, please refer to the Government of Canada's resources on Business Numbers.

Quebec Enterprise Number

The Quebec Enterprise Number (“NEQ”) is a ten-digit numerical identifier assigned to every company or business registered in Quebec with the Quebec company registry (Registraire des entreprises du Québec).

Your NEQ can be found on the Quebec Company Registry site. 

For additional information, refer to the publications, Government of Quebec: Learn About the Registration of an Enterprise and Revenu Québec: Application for a Trust Identification Number. 

Supplementary, non-regulatory reports are available to make it easier for you and your tax preparer to file your annual tax returns. Please speak with your BMO Nesbitt Burns Investment Advisor for assistance accessing the following supplementary tax reports:

Registered Summary Report

• Summarizes contributions, withdrawals, applicable withholding tax, and account activities during the tax year for Registered Accounts (i.e., RRSPs, RIFs, LIFs, LRIFs and TFSAs).

Non-Registered Summary Report

• Summarizes the dividends, capital gains, return of capital, interest, other income, fees, withholding taxes and realized gains/losses for the tax year.
• Includes account activities for the tax year and the highest daily closing market value during the year.

Calendar and Special Year-end Reports for Entity Accounts

• Summarizes the taxable transactions, inflows and outflows of cash, any fees and charges and realized gain/loss on securities sold/disposed in an Entity account during the previous fiscal year.

For taxation years ending after December 30, 2023 (tax year 2023 and later tax years), there are new reporting requirements that apply to most express/personal trusts resident in Canada. These trusts will be required to file an annual return even when there is no income tax liability, and the trust made no distributions/allocations during the year.

The following trusts will continue to be exempt from filing a T3 return and reporting additional beneficial ownership information if there is no income tax payable, no distributions made and no disposition of capital property in the year:

• Trusts that have been in existence for less than three months; and
• Trusts that hold less than $50,000 in assets throughout the taxation year (provided that their holdings are confined to deposits, government debt obligations and listed securities).

For additional information, please refer to the publication, New Tax Reporting Requirements for Trusts - BMO Private Wealth for additional information.

A Publicly Traded Partnership is any partnership whose interests are publicly traded on an established securities market or is readily tradable on a secondary market.

On January 1, 2023, the U.S. Internal Revenue Service's new rules impacting clients who hold Publicly Traded Partnerships went into affect, including the following:

• The new 1446(f) Internal Revenue Service regulation, which includes a 10% U.S. withholding tax that can apply to any Publicly Traded Partnership, including non-U.S. Publicly Traded Partnerships.
• The sale of a foreign (non-U.S.) Publicly Traded Partnership will not be subject to the 1446f withholding tax if the Publicly Traded Partnership provides a Qualified Notice (e.g., a '92 Day Notice’).
  • Please note: if an entity is organized outside of the United States and trades solely on a foreign established securities market or foreign secondary market (foreign-traded entity) it is presumed not to be a Publicly Traded Partnership for U.S. tax purposes –unless the broker has actual knowledge otherwise.

As a result of this rule, the following changes may impact the taxpayer:

• Selling an interest in a Publicly Traded Partnership after December 31, 2022, may result in a 10% U.S. withholding tax being deducted from the proceeds by BMO, who must submit the tax to the IRS;
• BMO must request a U.S. Tax Identification Number from any client holding a Publicly Traded Partnership on, or after, January 1, 2024, if the Publicly Traded Partnership distributed U.S. Effectively Connected Income or U.S. Effectively Connected Net Income during 2023;
• For U.S. tax purposes, a foreign partner's gain or loss from the sale of a Publicly Traded Partnership that is engaged in a U.S. trade or business is treated as income that is effectively connected with a U.S. trade or business. This means that the foreign partner is required to file a U.S. income tax return and report the income for U.S. tax purposes. Consequently, to fulfil this requirement, the foreign partner must have/obtain a U.S. Tax Identification Number from the IRS; and
• Where a client has received a Form 1042-S from BMO that reports the amount of U.S. tax withheld, the client can report the tax withheld on their U.S. tax return and receive a refund of the tax to the extent that the tax withheld exceeds the actual U.S. tax owing on the U.S. tax return.