We have been receiving some questions from our clients and wanted to pass along some information regarding impacts on the tax-filing season due to changes at the CRA.

You are probably aware of the walk-back on the proposed changes to the capital gains inclusion rate which was initially announced in the 2024 budget.  This would have increased the amount of capital gains which were subject to tax from 50% to 67% for taxpayers with more than $250,000 in capital gains, starting mid-way through 2024.  Although the proposed change hadn’t been legislated, CRA was still obligated to act as though it had been and tax software providers were also required to update their forms and software to reflect this change.  Only when the Liberals recently announced that they had abandoned this change were CRA and the software providers able to begin reversing the work done to their systems and software and this work is still in progress.

This has some wide implications for taxpayers and we are expecting that a large number of returns will be delayed as a result.  Some specific impacts are:

  1. Financial institutions that were reporting capital transactions on income slips may be delayed in releasing T3 slips and T5008 slips.  Brokerages and financial institutions that issue T5008 slips for securities transactions have had their reporting deadlines extended from February 28 to March 17.  T3 slips for mutual funds which report capital gains are normally due by March 31 but CRA has extended their filing deadline to May 1.   
  2. Since the new T3 slip deadline of May 1 is beyond the usual income tax filing deadline of April 30, for affected taxpayers, i.e., anyone receiving one of the above slips or otherwise reporting a capital disposition in 2024 (such as a sale of a rental property), the personal tax filing deadline is extended this year to June 2.
  3. CRA appears to be delayed in uploading a wide variety of other slips (T4’s, T5’s, T4A’s, RRSP receipts, etc.) to their system.  We rely on CRA’s “Represent A Client” service to verify the completeness and accuracy of our clients’ tax returns.  Normally, by this time, the CRA system is fairly reliable in having slips which are due by February 28 uploaded to their system.  At this time, we are seeing a very small proportion of the expected slips actually showing up and do not know when this information will be available and reliable.
  4. Our tax software goes through a large number of updates at the beginning of each year as tax and form changes are updated.  Normally, by the beginning of March, our software will be reliable and fully functional.  As of right now, we do not have a fully functioning module for 2024 personal income tax returns and do not have an ETA on when the remaining issues will be resolved.

We are still early in the tax season, but we expect that all of the above will impact a large number of our clients. We are taking steps to stream our operations so that unaffected returns can flow through our systems as quickly as possible.  In other words:

  • If you don’t have an investment account with mutual funds or a sale of real-estate or other capital property, we will prepare and process your returns as soon as possible.  We may still be delayed compared to past years due to issues with CRA systems or our tax software. 
  • If your 2024 return will include a capital disposition, we may set your return aside until we are certain that we both have all the required information and slips AND that the updates to CRA systems and our tax software are complete.  In this case, your filing deadline will be extended to June 1 and there will be no late-filing penalties or interest if your return is filed between April 30 and June 2.

Especially for this year, we would like to emphasize the importance of providing copies of any income slips you receive in the mail or electronically to us as we prepare your returns.  While we would normally be confident in the completeness and accuracy of slips which we download directly from CRA, there is a significant risk this year of missing income slips if we do so.  As the weeks pass, the information on the CRA site should increase in completeness and accuracy.  We will take all reasonable steps to verify that all expected slips are present before forwarding your return for your review, but it will be important for you to carefully review the included slips to ensure that all income is reported on your returns.  The copy of the return which we send to you for your review and signature includes a “slip summary” that lists all of the slips included on your return. 

Finally, we ask for your patience as we proceed through this tax season.

 Please call us if you have a situation you may need help with!