Early Filers Beware!

Ruth Horst

The tax filing season officially started February 24 and as usual, early filers are anxious to receive their refunds.

Over the past years, The Canada Revenue Agency (CRA) has been actively working to reduce the number of paper-filed returns as well as the amount of communication via telephone and mail. But with that comes some pitfalls. 

The Digital Tax System: CRA encourages everyone to use digital resources for their taxes and to accessing their own CRA records. To streamline this process, individuals have been encouraged to set up their MyAccount and professional tax preparers have been given access to Represent-A-Client (RAC). Both of these portals provide valuable tax information to help simplify and expedite tax filing.

The History: Efile was introduced in 1993 and Netfile was available in 2001. For the 2024 tax-filing season (Feb 2024-Jan 2024) 32.4% of the returns were Netfiled and 59.75 were Efiled resulting in over 92% of all tax returns being submitted digitally. 

It is also possible to request ReFile services to request adjustments to electronically filed returns.  Amongst a list of exclusions, ReFile cannot be used to 

- change a return that has not been assessed

- change a return that the CRA has already reassessed nine times

- change a return for the year before the year of bankruptcy or to change a bankruptcy return

- change a return that has a reassessment in progress for the same tax year

The Problem: While CRA will be ready to receive T1s at the end of February, it is crucial for taxpayers to understand Canada’s self-assessment system before they file early.

It is the responsibility of every taxpayer to fully declare all of their worldwide income in Canadian funds annually, regardless if the income source is viewable in MyAccount or not. Many individuals mistakenly assume that if the slips aren’t available in MyAccount or on RAC, they don’t exist.

Employers must submit T4 slips to CRA by February 28th each year. Similarly, banks and financial institutions have the same deadline for submitting T5 slips. However, trusts have a later deadline of March 30th for submitting T3 slips.

While these due dates are set, it doesn’t always guarantee that the information will be filed on time by the issuer, or that CRA will post it immediately. This means that the individual may have a slip that hasn’t yet appeared in their MyAccount or the slip could be available there but the individual has not received it by mail. Alternatively, the individual may neither have the slip nor find it available in MyAccount.

Each taxpayer is responsible for thoroughly accounting for all sources of income, regardless of whether CRA has received or posted the slips. ‘I forgot I worked there’ is never a legitimate excuse!

The Role of the Professional Advisor.  At this early stage, the slip information on MyAccount/RAC is often incomplete and will remain so for at least until mid-April. Tax preparers must be aware of this and conduct thorough interviews their clients, comparing tax returns year over year to ensure the completeness of the information.

Net-filers need to be aware of all of their income sources before submitting their own tax returns. Ensuring that all income is accounted for is crucial to avoid errors and missed deductions.

Beware the RRSP Receipt. One of the most delayed slips, both in MyAccount and in reaching the taxpayer, is the RRSP contribution receipt, particularly for contributions made in the first 60 days of the year. These receipts can take months to appear in MyAccount, and if they are noticed later, T1 adjustments to the prior year may need to be made.  It’s always best to request a digital/hard copy from the issuer at the time of contribution and to file the info properly.

Caution:  RRSP Overcontributions. Taxpayers must also understand that not everything is updated in real time in MyAccount. For example, the current 2025 TFSA contribution room amount showing may be overstated.

In January and February the amount includes the 2025 room that was just created on January 1st as well as the room that was available in 2024, regardless of whether a contribution was made or not. Once the banks and financial institutions report to CRA at the end of February, the contributions made in 2024 will be deducted from the room available providing a more accurate figure.

However, the updated amount will not include any contributions made since the beginning of the calendar year - only those affect the previous year (the tax year). RRSP contribution history is similarly reported and taxpayers must be diligent in understanding the calculations to ensure accuracy.

The Bottom Line: Accurate reporting of income and deductions on your annual tax return is a fundamental responsibility of every taxpayer. CRA enforces strict penalties for unreported income and missing tax slips. While filing early can be beneficial, it's crucial to ensure you have all necessary documentation. If you're awaiting specific tax slips, receipts, or plan to make RRSP contributions, it's advisable to wait until all documents are available before filing.

Taxpayers must thoughtfully review their information before submitting their tax returns. If an employer has not provided a T4 slip, and it is not available in MyAccount the taxpayer should contact the employer to request a copy to accurately report their income. If a tax return has been filed and the individual realizes that income was missed, a T1 adjustment should be filed immediately to correct the error.

Additional educational resources:

Canada's Income Tax Fundamentals Course

Canada's Income Tax Fundamentals Course is a stand-alone certificate course great for those with no prior tax or financial services work experience! Take 20 hours to learn in 8 chapters – featuring plenty of confidence-building, true-to-life case studies using student versions of professional EFILE tax software.