Help & Contact: 1 866 953 4769
Last updated: July 04 2024
Tax Season 2025: Filers of 6 or More Returns Must EFILE
Here’s a dark horse for those who NETFILE six or more T1 returns for friends and family. Starting in January 2024, it became mandatory for you to register as a tax preparer for the purposes of EFILE if you accept payment for those returns. Penalties are charged if you don’t comply and even if you want to, you may not pass CRA’s suitability tests.
In addition, you will need to commit to the required tax filing skills, and the additional costs for EFILE software . Nonetheless, tax filing as a pro is a great part time endeavor that can be very worthwhile.
Here’s what you need to know:
Who is Affected? You will be if you answer yes to any of these questions:
- Do you prepare personal tax returns every year for family and neighbors?
- Are you the go to person when your friend’s mother needs help with her tax return?
- Were there more than 5 returns prepared?
- Did you receive payment for the preparation of these returns?
Avoid Penalties and Register for EFILE. With these new changes now in effect for 2024, you are now officially a tax preparer! An individual who prepares five or more returns and receives payment for their services must be a registered e-filer. This means that the tax returns you have prepared must be electronically filed with the CRA. If you fail to electronically submit these returns, then you are subject to penalties. For personal income tax returns the penalty is $25 for each return that is not electronically submitted.
Who Can Apply For An EFILE Number? Here’s the criteria: you must be a Canadian resident, have a social insurance number, not be undischarged from a bankruptcy, and be 18 years of age or older.
Why You Need to Do It Now. When registering for your e-filer number it is important to leave lots of time for your application to be processed. According to the CRA website they will require 30 days to process the application if it is received before the end of December. The CRA takes this process very seriously and applications received after December may require additional time to process.
The CRA’s screening process looks for convictions, penalties you may have been subject to, and most important, applicants who are not current with their own tax reporting and compliance, not honoring any agreements that are in place for tax debts, and other disreputable activities will not be considered suitable.
How to Apply. Complete a suitability screening application with the CRA. This process is completed online through the CRA website. You are required to provide your name, social insurance number, RepID if you have one, and answer a few standard questions. The system will then generate an e-filer number and password, but you will have to wait for confirmation before the number becomes active. When the screening is completed a confirmation letter will be sent out either granting or declining your request.
What’s Next? So now you have an e-filer number and the CRA has granted you permission to use it. What is next? First you will need to change your software from netfile to CRA approved e-filer software. Depending on the needs of those you are working for there are many options to choose from.
More Complexity Coming for Tax Season 2025. With the new capital gains inclusion rules, restricted deductions for some rental property owners, changes to family business transfers and much more, the family and friends you do tax returns for might be more complicated. You may need different software to accommodate this. Remember software is like everything else, make sure it is appropriate for the types of returns you are preparing.
Knowledge Bureau has a new online to help you with this. Appropriately named “Canada’s Income Tax Starter Course” it features lots of practice on true-to-life income tax scenarios using student versions of three widely known professional software packages: Taxcyle, Profile and DT Max. The course will be available in August and early registration is now available. To sign up for the $395 tax deductible course – contact us at 1-866-953-4769 to pre-register.
Your New Obligations. Be aware of the rules you agreed to follow as an official EFILER.
- You are required to authenticate information slips and their sources for the returns you file.
- Ensure your clients are who they say they are.
- Only deal with your clients or their legal representatives directly.
- Do not file any returns without first having completed and signed T183 “Information Return for Electronic Filing of an Individual’s Income Tax and Benefit Return”.
- Have a secure and safe place to store and keep all documents for a minimum of six years from the dates they are filed.
- Most importantly stay current and comply with the provisions of the Income Tax Act by taking a tax update course every year.
Remember, as a tax preparer you now carry the responsibility of ensuring that each return you file is accurate. Bottom Line: You now may be liable for incorrect or incomplete work. Make sure you review and are up-to-current with the latest tax changes to avoid unnecessary errors. Knowledge Bureau can help with this. Here is a course synopsis to help you take the education you need to professionally file tax returns.
Remember your e-filer number will require annual renewal in the fall. With each renewal you will be provided with a new password which will activate once you have cleared the screening process. Here are some links to help:
