As you may know, we have supported a request to the CRA to extend the April 30 deadline to June 15. But if the deadline is NOT extended, here are some practical tips to reduce the burden of a COVID tax season.
1. Make every effort to comply with the deadline even if the tax return is incomplete, as long as it is substantially complete. File a T1 adjustment as soon as the original return is assessed.
2. Identify June 15 filers. These are individuals who carry on a business other than via tax shelters. This extends to spouses and common-law partners. Rental income is usually not business income (unless the operations are extensive enough to produce business income). These individuals must pay any tax owing by April 30 to avoid interest charges, but no late filing penalty applies if filing is by June 15.
3. Identify returns that clearly have refunds. They will not have a late filing penalty.
4. Do the best you can. For example, if you are unable to get exact figures, say for rental income, use estimates and correct this later. Starting with last year’s figures may be a guide for a reasonable approximation.
5. Focus on tax returns with possible balances owing, especially large balances. Ask the client to make a payment of a tax estimate or move the March 15, 2021 instalment to 2020.
6. Document the reasons for unavoidable late filing. If a penalty is assessed (which it may be automatically on the balance owing), this will be useful for a fairness application.
7. Omit items that are time-consuming where the information can be submitted later. For example, medical expenses are time-consuming to list and often are not large enough to be of significant benefit. A donation receipt may be hard to track down and can be used in the 5 subsequent years. Keep a list for later follow up.
8. Use the CRA shortcut method for an office-in-home claim. Amend the return later if warranted.
9. Approximate the foreign exchange on foreign (e.g. U.S.) capital gains and adjust later. Also ask brokers to provide the capital gains information.
10. If amended slips arrive after the return’s information is input, send an adjustment later.
11. Most importantly, don’t put anyone at risk, including yourself.
12. Stay focused. It is not easy in this environment but it is essential.
TAX TIP is provided as a free service to clients and friends of Cadesky Tax.
The material provided in Tax Tip is believed to be accurate and reliable as of the date of posting. Tax laws are complex and are subject to frequent change. Professional advice should always be sought before implementing any tax planning arrangements. Cadesky Tax cannot accept any liability for the tax consequences that may result from acting based on the contents hereof.