Finance recently delayed the implementation of these proposed reporting rules to taxation years ending after December 30, 2023 (instead of after December 30, 2022), which gives trusts additional time to consider structural changes and weigh the benefits of the trust against the additional costs of compliance with the broad rules. Affected trusts will otherwise be required to report certain information on each trustee, beneficiary, settlor and protector of the trust in their 2023 tax return, subject to limited exceptions. As a result of this change, more trusts (including bare trusts) will also have to file an annual income tax return.
Affected trusts should take action now to consider whether it may make sense to either wind up a trust that no longer serves a purpose, close in-trust accounts or restructure an existing trust before the end of the year. An affected trust that is wound-up in 2023 will still have to gather and report required trust information in a tax return for its final year under the proposed rules (as it will still have a December 31, 2023 taxation year). These proposed rules, which carry significant penalties for non-compliance, are expected to be enacted soon.
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