Why Tax Pros Are Worth Their Salt

Alan Rowell, MFA, DFA-Tax Services Specialist, shines a light on a new communications issue at CRA...how would you advise a client with this problem?

On June 25, 2013 the taxpayer was reassessed for the 2011 tax year.  The reassessment resulted in the following:

• Income was moved from line 101 (Employment Income) to line 130 (Other Income)
• Deduction for CPP (line 308) was removed
• Deduction for EI Premiums (line 312) was removed
• Income Tax Withheld at source (line 437) was removed
• Canada Employment Amount (line 363) was removed
• The Notice of Reassessment with the outstanding balance was mailed to the client.

The long and short of this story is that CRA does not have on file the Employer’s T4 summary and slips. Whether this is because the employer didn’t file them or they are somewhere inside of CRA, it really doesn’t matter; they’re not within CRA’s computer system. In the meantime, the taxpayer has to contend with a tax bill.

This prompted a telephone call by the tax professional to CRA’s service centre, looking for explanations. After posing the question, the CRA representative went to check on procedures and came back with the two alternatives:

1. The taxpayer should go to the employer and require the employer to file the T4 slips and summary, or,
2. The taxpayer can file a complaint with CRA against the employer by filing an “Employee Complaint Form” which CRA will then investigate.

Further the representative stated:

• A T1-ADJ will not be processed as it will result in the T1 being returned to its original state. For some reason, the system won’t allow it to be processed.
• A Notice of Objection could be filed. This will result in a 6 to 9 month wait before being addressed.
• A Systematic Service Complaint can be filed with the Ombudsman’s office, but this will only correct future problems, not the taxpayer’s individual problem.
• A Service Complaint may or may not result in a speedy resolution. (But, it’s probably worth a try.)

What’s wrong with this picture?  Assuming CRA has never received the T4 Summaries, it appears that the responsibility for enforcing compliance on the part of the employer has been passed along to the taxpayer.

What should be done? 

Three steps:

1. File a Notice of Objection to put the taxes owing in dispute so that they can't garnishee wages.
2. Attach a duplicate copy of the T4 slip and/or pay stubs. 
3. Wait it out, but don't waiver – Income taxes paid, CPP and EI contributions should all be put in the correct accounts...eventually.