Understand Your Tax Slips: T3, T4 and T5

Tax statements or slips are the most important type of document to be used to prepare your tax return. Below is a quick summary of T3, T4 and T5.

During tax time, we get different type of tax slips either from our Employer, Business or Trust. Most of these tax statements are issued to you by the end of February, however, some slips, such as T3 and T5013, do not have to be sent before the end of March. As a CPA, we believe that you should have basic understanding of your tax slips.

T3 Statement

A Canadian T3 tax slip, or Statement of Trust Income Allocations and Designations, is prepared and issued by financial administrators and trustees to tell you and the Canada Revenue Agency (CRA) how much income you received from investment in mutual funds in nonregistered accounts, from business income trusts or income from an estate for a given tax year. To see a T3 slip image and learn more about it click here.

T4 Statement

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If you are a salaried employee, the T4 – Statement of Remuneration Paid tax slip is a summary of your employment earnings and deductions for the year. This slip is issued by your employer and it explains all income earned during a given tax year. It is the most common slip reported on the annual tax return. A T4 slip will include a person’s salary, and wages above $500, including bonuses, commissions, tips, gratuities, vacation pay and any other payments received by the employee for the year. Employers must provide T4 slips to its employees by February 28.

Other common T4 statements can be found on CRA website Here:

T5 Statement

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T5 is a statement of investment income slip. It can include interest, dividends, and certain foreign income. A T5 slip must be prepared by financial institution, and issued to you and to the Canada Revenue Agency (CRA). You use it to report any investment income you earned on your tax return.

Few Takeaways

• Contributions made to RRSPs can be claimed as a tax deduction on personal tax returns. In general, your RRSP contribution limit for 2019 is 18% of earned income you reported on your tax return in the previous year, up to a maximum of $26,500. For 2020, the dollar limit is $27,230. However, there are other conditions and a few other things you need to know and understand.

• A tax-free savings account (TFSA) is a savings account in which contributions, interest earned, dividends, and capital gains are not taxed, and can be withdrawn tax-free. Also, you don’t have to have earned income to contribute to a TFSA, but those contributions cannot be deducted either.

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