Tax Filing Errors:  Fix ‘em Online, but Be Careful

It’s going to be one of those tax years – lots of complicated tax changes plus lots of reasons for taxpayers to want their tax refunds early. 

But it’s common this time of the year for people to rush into filing at the expense of missing slips that arrive after the fact later in March and early April.  In fact, filing without reporting all the income can be very expensive.  So adjusting your return as soon as possible after discovering an error is prudent – you can avoid gross negligence and unreported income penalties best that way.  But adjusting returns for errors or omissions can be tricky, depending on whether you file and adjust online or on paper.

The “official” processing time for online correction is approximately 2 weeks, and by mail approximately 8 to 10 weeks, but in practice,  the actual remedy results can really vary, according to tax practitioners working with adjustments.  It’s not unusual for correspondence to get lost in the shuffle between taxpayer requests and CRA “automatic adjustments” for missed slips, either.   So, it’s most important to keep records on when adjustments are actually requested – under either method – and to stay on top of any cross-over adjustments to make sure the taxpayer does not get caught up in unnecessary penalty assessments.  If that happens a request under the Taxpayer Relief Provisions is important.  At this point, you should be dealing with a pro.

Here’s what to do to adjust returns:

Online:  Online adjustments can’t be made until CRA has assessed the original filing of the return.  This is a problem as explained above, as taxpayers will not want to be in a dispute about voluntary compliance.  Best to let CRA know immediately about missed income and discretionary deductions provisions in particular,  in which case, hard copy adjustments, with date stamped verification of the request,  are often the best way to go.

Corrections can be made by the taxpayer online by using "My Account" and clicking on "Change my Tax Return".  But you have to know what you’re doing here:  requesting line adjustments for all the provincial and federal amounts can be confusing.

Taxpayers often don’t understand all the other lines being affected by the adjustment and therefore fail to “optimize” other provisions – like the new Family Tax Cuts, charity or medical claims for example.  Carry forward provisions like capital or non-capital losses can also suffer consequences.  Tax advisors can request changes for their clients through “Represent a Client” and make sure the optimization happens throughout the family returns.  

Snail Mail:  If the correction is being made by mail then a T1-ADJ, T1 Adjustment Request must be completed and supporting documents attached. This should be mailed to your Tax Center.  Addresses are listed on the back of the form.

Also remember, corrections to most provisions and for form filing omissions can be made to the current year and the previous 9 years tax returns, if other mistakes are found, and to record unclaimed losses or missed RRSP room.  March is a much better month than April, to clean up any tax messes from prior years and potentially, increase your “pot of gold” from CRA.

And by the way, taxpayers are not the only ones making mistakes. According to a CTV news article, mistakes are rife at the CRA, too.  The story makes reference to an internal CRA survey conducted in late 2013, which showed that 25 per cent of business inquiries were incorrectly answered by CRA agents. According to an interview by the CBC, the Minister of National Revenue Kerry-Lynne Findlay found those results "unacceptable," and that noted that "there is no way to know that there is a financial impact" when a tax inquiry is answered incorrectly." 

The onus of proof, meanwhile is on the taxpayer to file a correct return, under threat of very prohibitive penalties.  For many taxpayers, the lure of the "quick and easy" electronically filed tax return can quick become a drawn-out and expensive nightmare of errors and omissions.  For that reason, many taxpayers choose to invest in working with an experienced tax specialist to strengthen the odds that a more correct and audit-proof tax return is filed and managed throughout the rest of the year.

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