Everything you need to know about the T5013

If you operate a business partnership in Canada, the CRA will expect you to fill form T5013 if you gross beyond a given limit. Here's everything you need to know about the T5013 taxpayer form, including who should file and how.

What Is the T5013?

The T5013 form is the designated Partnership Information Return. Also known as the Statement of Partnership Income, professional partnerships use the T5013 slip to report basic information about their business to the CRA. Although partnership income isn't taxed in Canada, the CRA requires this form to determine the net income (or loss) that should be reported in each partner's return. It is worth noting that T5013 is part of the broad Partnership Information Return that features various schedules. If your business is required to complete the T5013, you must also complete the following slips:

• T5013 FIN Partnership Financial Return

• T5013 Schedule 1(Partnership's Net Income or Loss), Schedule 50 (Partnership's Ownership and Account Activity), Schedule 100 (Balance Sheet Information), Schedule 125 ( Income-Statement Information), Schedule 140 (Summary Statement) and Schedule 141 (Financial Statement Notes Checklist)

• T5013 SUM Income Partnership Summary

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Who has to file a T5013?

All eligible partnerships should file their T5013 slips and use them to report accurate information on the annual return. The CRA recognizes a partnership as any two or more individuals, trusts, corporations, or partnerships that come together to carry out business/trade. If you and another person contribute money, skill, labor, or service and expect a return, the relationship is considered a partnership and is required to fill the T5013 form if:

• The total of all revenue and expenses exceed the $2 million threshold during a fiscal year. This applies even if the expenses exceed the revenue, for instance, if you generate $800,000 in revenue and incur $1.5 million in expenses.

• If the partnership owns excess of $5 million in assets. The CRA considers both tangible and intangible assets located in Canada and worldwide.

• If you are a partner in another partnership or have a corporation or trust as a partner.

How Do You File a T5013?

If you are required to file a T5013 Statement of Partnership Income tax form, you will also be expected to complete all other necessary documents. You can visit CRA's official website for online filling or download the forms to complete offline. Here's a quick overview:

1. Fill the T5013 FIN – This is the first step to completing your T5013 tax slip and features four pages with three main parts for partnership information, required documents and additional/miscellaneous information. This slip involves reporting the partnership's name, address, type, account number, etc. and identifying the schedules to be completed.

2. Complete necessary schedules – There are various schedules eligible partnerships must fill for each fiscal year. The schedules named above (1, 50, 100, 125, 140 and 1412) are mandatory for all eligible partnerships. Depending on your T5013 FIN answers, you might also be required to full Schedules 2, 5, 6, 8, 9, 12 and 52. These schedules can get complicated, so it is recommended to engage professional tax services.

3. Fill your two-page T5013 – This is the familiar slip you will encounter when searching from form T5013. It has two pages with fixed and generic boxes where you enter information about the share of partnership each partner holds, net income (or loss) capital gains (or losses). Generic boxes report additional information regarding your share of the partnership's expenses, revenue and income (or loss). If you are a member of more than one partnership, you must fill separate T5013 slips for each.

4. Complete T5013 SUM – This is a two-page summary of partnership income where you report the total amounts from all T5013 slips you have, including both Canadian and foreign net income.

To file your T5013, you will need a partnership account number (RZ number), which you can register for online. It is a 15-character code for all eligible partnerships filing form T5013. Once you have accurate information for all relevant fields, you can complete and submit your form using CRA My Business Account or Represent a Client if you are filling for a client. Another option is to use trusted tax preparers such as SimpleTax or download, fill and mail the completed forms to the appropriate tax center. However, you should note that CRA discourages paper filling and mailing.

How to Determine Partner or Partnership Income?

Partnership income calculation isn't much different from others. The net income (or loss) is determined by subtracting expenses from the gross revenue. The share for each partner will depend on the terms of the partnership contract, often predicated on the value of each member's contribution. If you are in a 50-50 partnership, you will share the profits and losses equally, unless the contracts say something different.

What If I Have Transactions with Non-Canadian Partners?

T5013 tax slip is designed for partnerships in Canada, offshore Canadian corporations and pacts with offshore entities. If you have non-Canadian partners, you are still required to report your partnership income, provided you exceed the $2 million threshold for revenue and expenses and meet other eligibility requirements. You will also be expected to complete boxes in the Canadian and Foreign Investment sections.

What Happens After You File?

Once you file your T5013 tax slip and all required documents, the CRA will review them and contact you if there's any discrepancy. Canada generally doesn't tax corporation income, so these slips aren't for partnership tax contribution. Instead, the CRA requires this information to determine if partners reported accurate net income in their annual T1 returns. If everything is okay, nothing much will happen. Failure to submit the form within the specified deadlines will result in a penalty of up to $25 per day. Upon submission, the CRA will take up to four weeks to complete cross-examining the information. You can also make amendments to the T5013, which involves acquiring other CRA slips.

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