3 Million T1’s Received, 25 Million To Go

As of March 1, 2015 just over three million personal tax returns had been received by CRA and not surprisingly, only 13% of these returns were paper-filed – everything else was filed with CRA electronically. 

Gone are the days when we would line up at the post office on April 30th to make sure that our paper copies of our personal tax returns were in the hands of Canada Post before the deadline. Electronic filing has taken away this annual tradition which typically included accountants high-fiving one another as returns were safely deposited.

Today, we still need to file returns by midnight April 30 (June 15 for proprietorships) to avoid penalties and interest, whether we do so online or by mail.  But as the vast majority of returns are indeed being sent electronically, tax advisors and their clients may wish to discuss a number of issues now, including any privacy or security concerns, cash flow required to pay a balance due to CRA and tax planning for 2015 in advance of the mad rush.   Here are just some of the reasons to file on time:

Get Your Refund.   Because tax is over-deducted at source by employers—which means the government gets a good share of the first dollars you earn—the vast majority of us must file a tax return to get a tax refund. The amounts owing to you can be large—the average refund last year was just under $1,700 – and starting with the 2014 tax filing year, the figure will rise for many families as a result of the new Family Tax Cut.  But do wait for all of your slips – remember the deadline for T3 slips is March 31.

Credit Filers.  Did you know that 70% of Canadians receive government transfers, which represent 12.5% of their total income. And for just under 13% of Canadians, government transfers are their only source of income. These include the Canada/Quebec Pension Plan (CPP/QPP), Old Age Security (OAS), Guaranteed Income Supplement (GIS), Employment Insurance (EI), Child Benefit Programs and various forms of social assistance, workers’ compensation and numerous refundable tax credits from both federal and provincial governments.  To apply to receive all that money, you must file the T1.

Those Who Owe.  You must file a tax return if you owe money to CRA, in order to avoid penalties, interest, and in severe cases, jail.   You must do so by midnight, April 30, unless you are a proprietor (unincorporated, self-employed), in which case you must file by midnight, June 15.  You’ll incur interest charges, however, if you owe money on June 15 and haven’t filed by April 30.  Therefore it’s best to file by midnight, April 30.

Other Reasons to File.  There are other reasons why you would want to file a tax return, outlined below:

Investors - To record losses: non-capital, or capital losses

• Students:  To transfer unused tuition, education and textbook amounts, and claim provincial tuition fee rebates (See Manitoba Tuition Fee Income Tax Rebate Form T1005).

• Carry Forwards:  To carry forward unused charitable donations, medical expenses, tuition amounts, and other provisions on the tax return

• Carry Backs:  To carry back capital and non-capital losses – a great way to recover taxes paid on prior filed returns.

• To create RRSP Room

• To qualify for the Old Age Security (OAS) Supplement

FINAL RETURNS.  Several relief options are available to delay the payment of taxes when a taxpayer passes away:

o Rights and Things Returns (certain amounts can be claimed in full on each return, split between returns and claimed against certain income sources)

o Election to delay payment on a large deemed disposition of capital property at death. Interest will be charged however, security for the amount owning may be posted by filing form T2075 Election to Defer Payment of Income Tax, Under Subsection 159(5) of the Income Tax Act by a Deceased Taxpayer's Legal Representative Or Trustee  See revised Form TX19 Asking for a Clearance Certificate, Revised Guide T4011 Preparing Returns for Deceased Persons. Also see the new Death of a Taxpayer Course from Knowledge Bureau.

Filed too soon?  Guilty conscience? Remember, it is possible to reach back up to 10 years to recover refunds from errors or omissions:

• File an adjustment to prior filed returns to access refunds under the Taxpayer Relief Provisions

• File a formal Notice of Objection to put taxes “in dispute” to avoid garnishee of wages

• Contact the CRA collections department for instalment payment plan if you can’t pay all your balance due at one.

Please note: there was an error in the headline of the earlier version of this story. Knowledge Bureau apologizes for any inconvenience this may have caused.