Tag: Tax filing

Filing your 2015 taxes: What’s new, what’s noteworthy

It’s tax-filing season once again, and this year April 30 falls on a Saturday. In accordance with Canada Revenue Agency (CRA) policy, the deadline for filing individual tax returns is extended to the next business day, Monday, May 2. By the way, it’s just a quirk of the calendar that this also happens to be a leap year; this has no direct effect on the filing due date.

For someone who runs a business as well as for that person’s spouse, the tax-return due date is Wednesday, June 15, though any tax payments remain due by the May 2 individual filing deadline.

In this summary, we’ve included new developments, some items we felt worth reiterating from recent years and an update on the continuing efforts of the CRA to improve communications with taxpayers.

Registered retirement income fund (RRIF) minimum withdrawals

The 2015 Federal Budget reduced the RRIF minimum withdrawal amount for those aged 71 to 94. An individual who received a greater amount in 2015 than required had the ability to recontribute the excess to a RRIF no later than February 29, 2016, for which a deduction may be claimed on the individual’s 2015 return.

Family tax cut

Introduced by the former Conservative government, this provision is slated to be repealed by the current Liberal government. In the meanwhile, it remains valid for 2015 tax filing. Parents of children under age 18 may use Schedule 1A to calculate their reduced tax liability based on a notional shift of up to $50,000 income from one parent to the other. The net reduction in tax may be claimed as a tax credit, capped at $2,000.

Child care expense deduction

This deduction must be claimed by the lower-income parent if there are two parents in the household. The maximum per-child limit was increased by $1,000 for 2015, applied as follows:

  • Born in 2009 or later, for whom the disability amount cannot be claimed: $8,000
  • Born in 2015 or earlier, for whom the disability amount can be claimed: $11,000
  • Born in 1999 to 2008 (and born in 1998 or earlier, with a mental or physical impairment, for whom the disability amount cannot be claimed): $5,000

First-time donor’s super credit

This credit, announced in the 2013 Federal Budget, can be claimed only once from 2013 to 2017. It allows an additional 25% tax credit on charitable donations made in cash up to $1,000. This applies to the federal credit only. To qualify, neither the taxpayer nor his/her spouse or common-law partner may have claimed any amount of the charitable donation tax credit in any of the five preceding tax years.

Lifetime capital gains exemption (LCGE) – Farming and fishing

The 2015 Federal Budget increased the LCGE for farming and fishing from $813,600 to $1 million. This higher amount may be claimed for dispositions after April 20, 2015.

Foreign-income reporting

The foreign-income reporting changes first announced in the 2013 Federal Budget have again evolved. The general requirement remains that where the cost amount of specified foreign property (generally investment property) exceeds $100,000, the T1135 Foreign Income Verification Statement must be filed.

For 2015, if the total cost amount is less than $250,000, the taxpayer is not required to use detailed “per-asset” reporting. The T1135 now has a “Part A: Simplified reporting method” that is significantly streamlined. The taxpayer need only check the box adjacent to each relevant property type, indicate the top three countries where property is located and disclose the sum of income and gains/losses from dispositions.

The T1135 continues to be due on the same date as the individual’s tax return. This form may be filed electronically.

Repeated failure to report income penalty

A taxpayer who fails to report income is subject to penalties (in addition to any unpaid taxes and interest), and penalties are even higher for repeat offences. At times, this penalty can be disproportionate to the associated tax liability. Under proposed changes from the 2015 Federal Budget, beginning with the 2015 tax-filing year, the penalty is to be capped at the lesser of 10% of the unreported amount and 50% of the difference in understated tax (or overstated credits).

Communications with CRA

In recent years, CRA has made a concerted effort to better communicate with taxpayers. This year’s highlights include the following:

  • MyCRA – Though touted as a mobile app, this is mainly a mobile browser bookmark to access streamlined data of a taxpayer’s MyAccount. Nitpicking aside, it is a useful access point
  • Auto-fill my return – For taxpayers registered with MyAccount, this service draws from sources such as T3, T4 and T5 slips to populate corresponding fields in an individual’s tax return
  • Notice of assessment (NOA) – CRA has revamped the NOA to make it easier to see the most essential information first. With the May 2 deadline fast approaching, we shall see soon enough

More information can be found on the CRA website at
http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/rtrn/cmpltng/whtsnw-eng.html.

CRA compelled to assess tax return claiming credit in alleged gifting tax shelter

At issue

A person who owes tax may be pleased if the Canada Revenue Agency (CRA) delays assessing a tax return.  On the other hand, such delay can obviously be costly to someone who is anticipating a significant refund. 

This is the tactic employed by the CRA in recent years in the ongoing cat and mouse game over gifting tax shelters.  But it will need to be revisited in light of a Federal Court ruling last month.

Section 152(1) of the Income Tax Act (ITA)

The ITA specifically empowers and obliges the Minister National Revenue (MNR), through the CRA, to assess tax returns:

152. (1) The Minister shall, with all due dispatch, examine a taxpayer’s return … and determine … (a) the amount of refund … ; or (b) the amount of tax
[emphasis added – See McNally below]

CRA on “Tax Shelters”

The CRA maintains a page on its website warning of the dangers of investing in tax shelters.  In addition to outlining the nature of tax shelters and potential implications for taxpayers participating in them, there is a brief history of CRA’s efforts to curtail them and an inventory of Tax Alerts from as far back as 1998.  

Not mentioned on the page is the audit policy the agency began applying around 2010.  Where a taxpayer claims a credit through an organization that is (or is to be) audited as a potential gifting tax shelter, the return will not be assessed until after the audit is completed.  Audits of this nature may take a year or more to complete.

McNally v. MNR, 2015 FC 767

Mr. McNally filed his 2012 tax return on time in April, 2013, in it claiming a donation to EquiGenesis.  In June 2013 he received a letter from the CRA advising him that his return would not be assessed until an audit of EquiGenesis could be completed, which “can take up to two years to complete.”  He was given the option to withdraw the claim (for the time being), in which case CRA would assess the return without further delay. 

 Mr. McNally instead initiated the present application seeking an order of mandamus requiring the Minister to assess his return.

EquiGenesis had been audited and had charitable tax credits denied in 2003, 2004 and 2009, but allowed in 2005 and 2006.  The 2010, 2011 and 2012 programs are currently under audit.

Interestingly, Mr. McNally conceded that the “outcome of his assessment is a forgone conclusion [that] his credit will be disallowed.”  Still, he sought the current order so that he could proceed with his appeal rights under the ITA.

With regard to the audit policy, the MNR stated that the “purposes in implementing this change were to deter participation in such tax shelters.” 

With such a clear statement of the policy purpose, the judge concluded that “it is plain and obvious that Mr. McNally’s rights have been trampled upon for extraneous purposes.”  While there may be circumstances when an assessment may legitimately need to await an audit of a third party, the stated purpose of discouraging gifting tax shelters leads to the conclusion here “that the audit is an excuse for delay, not a reason for delay.”

On the central issue of the MNR’s statutory duty to assess a return “with all due dispatch”, the judge sided with Mr. McNally.  His return was to be examined and a Notice of Assessment issued within 30 days of the judgment.

Practice points

  1. Though McNally may be appealed, participants in gifting tax shelters may try to use this ruling to press CRA to assess presently-delayed returns. 
  2. Bear in mind that this is a procedural issue, having no impact on the legitimacy of a given gifting tax shelter, nor on the ultimate validity of any claimed credits.
  3. Along a related line of litigation, in McNally it was mentioned that the 2009 EquiGenesis program is before the Tax Court in October this year.

The CRA app is here! – Well, maybe not just yet

I have been looking forward to the Canada Revenue Agency’s release of its new personal tax app.

This is of particular personal interest, as about a decade back I penned an academic paper comparing the effectiveness of the CRA’s website to the offering of the Australian Tax Office (ATO).  In my opinion, it was clear that the Aussies had a much better grasp of the available technology at that time, and were using it much more ably to communicate with their constituents.

In the intervening years, I have continued to have an interest in the CRA’s communication practices and adoption of emerging technologies. The agency has been making some noticeable strides toward more effectively engaging with taxpayers, in particular in its online services like MyAccount.

While MyAccount houses a taxpayer’s detailed information, streamlined access is also available by logging in using the “My tax information” button on the MyCRA webpage.  On that page, there are also buttons for “My Payment, Benefit payment dates, Help with my taxes and Charity information”.  These latter resources are general in nature (ie., not specific to the taxpayer), and do not require logging in.

An underwhelming release

Now that we are into the tablet era, focus shifts toward the importance of the app as a key communications portal.

For months the CRA has been signaling toward the February 2015 release of the personal MyCRA app, but as that month came to a close the ‘Mobile apps’ landing page within the CRA site still only had  a link to the MyCRA webpage.  But in a March 2 news release, CRA stated that it was “proud to announce the release of its new mobile app – MyCRA – available for all mobile devices like smartphones and tablets.”

I checked the App Store, and could not find what I was looking for, but that is not all that uncommon.  My second stop was that CRA Mobile apps landing page, but it still simply linked to the MyCRA webpage.  On that page however, there was now a hyperlinked phrase “Add to home page instructions”.  Tapping there brings up an overlay window with simple instructions for placing “this web app” on the tablet’s home screen.

After completing the task, I went to the MyCRA icon now on the surface of my tablet and … it simply re-launched my browser, opening to the same MyCRA webpage I had just been on.

Minimal content, for now

Now I’m not an information technology expert, but I’m generally able to distinguish between an app and a bookmark.  One is left to wonder whether this is the intended end product, or if a true MyCRA app could not be developed in time, and this became the fallback.

Still, perhaps I was getting too mired in the process. Perhaps the substance of the change was waiting behind the “My tax information” button, so I logged in.  This gave me expected  access to the status of my 2014 return (not yet filed), related notices of assessment and RRSP and TFSA contribution limits, and that was all.

While I would not dispute that this is important and useful information, in my opinion the experience falls short of the expectations the lead-up generated.  Indeed, many of the items highlighted in the news release are those general information categories available without need to log in, let alone employ the “app” to launch the page in the first place.

In fairness, it appears that the MyCRA site (and the real app to follow?) is intended to be a platform for future communications (stating that it will house returns and assessments from 2014 on), and no doubt it will evolve.  For the present though, this is a disappointing baby step as the CRA strives to improve its service delivery to taxpayers.