Many of our clients have investments outside of their RRSPs. Whether they’ve bought a mutual fund from their bank, or participated in a share purchase plan at their place of work, these ‘unregistered’ investments have unique tax reporting obligations.

Report the Gains or Losses

In addition to T3 and T5 slips, tax payers are also required to report the gain or loss when they sell or ‘switch’ investments (ie. If you move your mutual fund from your non registered account to a TFSA or RRSP, this becomes a tax-reportable event).

These gains or losses are reported on a T5008. This requirement is poorly understood by taxpayers and financial institutions alike. All of the banks in Canada are required to submit this information to Revenue Canada and in 2015, almost all of these slips have been prepared incorrectly. Although the banks have reported the sales proceeds, they have not recorded the cost to purchase the investment. As a result, Revenue Canada sees gains much larger than the client actually had. In fact, many clients have lost money in their bank-owned mutual funds, but the tax slips reflect a 100% gain.

It’s complicated… and it’s important to get it right. Many people will pay tax that they don’t owe simply because the slips are incomplete.