The Office of the Taxpayers’ Ombudsperson acts independently from the Canada Revenue Agency (CRA). Canadians can file complaints with the office if they believe the CRA has not respected one or more of the eight service-related rights in the Taxpayer Bill of Rights. Our main objective is to improve the service provided by the CRA to taxpayers and benefit recipients.

An important part of the Taxpayers’ Ombudsperson’s mandate is to identify and examine emerging systemic issues related to the CRA’s services that have a negative impact on taxpayers. We are particularly attentive to issues that may affect vulnerable populations in Canada.

Recently, we undertook a review of the administration of bare trust filing requirements for 2023.

The Government of Canada has introduced new reporting requirements for all trusts as part of its international commitment to transparency of beneficial ownership information, as well as its ongoing efforts to ensure the efficiency and integrity of the Canadian tax system. For most types of trusts, including bare trusts, the deadline to file a T3 Trust Income Tax and Information Return and Schedule 15 for 2023 was March 30, 2024.

On March 28, 2024, the last business day before the filing deadline, the CRA announced that it would not require bare trusts to file a T3 return, including Schedule 15, for the 2023 tax year unless the CRA directly requests it.

The public wanted answers, and we wanted to see if the CRA’s service-related processes could be improved. The examination, launched in July 2024, focused primarily on the requirements for the bare trust tax return and whether the CRA had respected two rights set out in the Taxpayer Bill of Rights, more specifically:

• Right 6: the right to complete, accurate, clear and timely information.
• Right 10: the right to have the costs of compliance taken into account when administering tax legislation.

One of the main issues is that the CRA applies laws that are binding. This is why the Department of Finance Canada announced in August2024 that it would consult with Canadians to clarify the reporting rules for bare trusts and to reduce the administrative burden on taxpayers.

While the CRA has taken steps to communicate with taxpayers about the new reporting legislation, it has not provided clear information in a timely manner.

Similarly, although the CRA has made efforts to limit the costs of compliance, overall it has not reduced the time, effort and costs that taxpayers had to incur to comply with the new filing requirements.

Following this examination, the Taxpayers’ Ombudsperson made five recommendations:

1. Conduct an internal review of how it collaborates with stakeholders when legislative amendments are adopted by Parliament. The review should be completed by March 31, 2026. The goal of the review should be for the CRA to improve its consultation process to ensure it understands the estimated number of Canadians who could be impacted, and, where possible, considers the perspectives of stakeholders on key strategic issues that affect them, their members or their clients.
2. Conduct an analysis to determine if it would be beneficial to introduce a unique form for bare trusts to meet the new reporting requirements so they can easily submit the necessary information. The analysis should be completed by June 30, 2025.
3. Review how it works with Finance Canada, particularly when it appears that the administration of a legislative proposal could increase the costs of compliance for taxpayers. The review should be completed by March 31, 2026.
4. Review how it communicates updates to Canadians, specifically through tax tips and news releases when tax or benefits requirements change. The review should be completed by March 31, 2026. The goal of the review would be to determine whether improvements could be made through web optimization to ensure the CRA provides a consistent, efficient and timely organization-wide approach to publishing and disseminating information. This could help those impacted to easily find and understand the changes.
5. Create an adaptable guide to help it streamline how it administers changes to tax legislation. The guide should take effect by March 31, 2027. The purpose of creating a guide is to improve taxpayer service. The guide should ensure that changes to information related to taxes and benefits are published in a timely manner and can be understood by the average taxpayer. In addition, the guide should include an action plan to address the challenges, if identified, along with a follow-up.

To view the full report, please visit our web page.

Our review of the administration of the Canada child benefit for temporary residents

We were made aware of potential systemic issues at the CRA in how it administers the Canada child benefit (CCB) for temporary residents following a complaint filed with our office. Most temporary residents who meet the conditions for the CCB, including having been a continuous resident of Canada for 19 months, are eligible for the CCB. However, we have identified issues that result in unnecessary interruptions of CCB payments for some temporary residents.

A key issue in the examination, launched in March2024, was that the CRA would stop paying the CCB after the expiry of the temporary residency status in its system, even if the temporary resident may still be eligible for the benefit. This may happen because it is the taxpayer’s responsibility to send the CRA proof of their updated status. But it takes the CRA 14 weeks or more to process the updated temporary residency status information. Therefore, temporary residents do not receive CCB payments while they wait for the CRA to process this information.

Although the CRA sends payments to the temporary resident retroactively once it has updated their immigrant status, the temporary resident must still pay their bills in the meantime. While waiting weeks for the CRA to update their file, parents still have to feed their children and families still have to pay rent. This can be very difficult or impossible without the CCB.

To better understand the factors surrounding the issue, we examined how the CRA informs temporary residents of the eligibility criteria to continue receiving the CCB without interruption. We also examined whether the CRA communicated with Immigration, Refugees and Citizenship Canada (IRCC) and whether it could simplify the process to prove eligibility.

To continue receiving the CCB, temporary residents must have legal status in Canada, including maintained status. They have maintained status if, before their permit expires, they have submitted an application to IRCC for an extension of their permit and are waiting for IRCC to make a decision. As long as they have maintained status, eligible temporary residents are still entitled to receive the CCB.

However, we note that the CRA does not notify temporary residents before it stops CCB payments. And, as mentioned above, the CRA stops paying the CCB after the expiry of the temporary resident status in its system, even if the temporary resident has legal status. Although it is the taxpayer’s responsibility to notify the CRA of updates to their immigration status, this is problematic because they may not know that they need to send updated information to the CRA until they try to find out why their benefit payments have stopped. Due to the CRA’s long processing times, which compound this issue, temporary residents could wait more than four months for their CCB payments to resume.

Following this examination, the Taxpayers’ Ombudsperson made 11 recommendations: The CRA should:

1. Remind taxpayers whose immigration status is about to expire that they must provide proof of any update to their legal status to make sure their benefits are not interrupted.
2. Give taxpayers a way to check the expiry date of their immigration status in their online CRA account.
3. See if it can make information that requires action more prominent on the initial notices it sends to temporary residents.
4. Provide information online at the “Keep getting your payments” web page for temporary residents about what they must do to prevent their payments from stopping and what they can do to get their payments reinstated if they are stopped.
5. Centralize the information it provides to newcomers and include information targeted at temporary residents.
6. Communicate directly and in a timely manner with temporary residents who may be eligible for the CCB.
7. Allow taxpayers to track CCB correspondence through its progress tracker.
8. Inform taxpayers, through its CRA’s Check Processing Time tool, of how long it will take to process CCB correspondence.
9. Improve how it processes immigration status updates for CCB recipients when there is a gap period and the new permit does not reflect that their status was maintained, explaining why they will not get payments for the gap period and who they should contact if they had maintained status for the whole period.
10. Review the length of time it considers someone to be a newcomer after their arrival in Canada.
11. Implement an information-sharing agreement with IRCC to get immigration information and continue collaborating with IRCC to work towards an automated solution to get real-time data.

To view the full report, please visit our web page.

François Boileau is the taxpayers’ ombudsperson at the federal Office of the Taxpayers’ Ombudsperson. You can reach him via MediaRelations-RelationsMedias@oto-boc.gc.ca.

The Canada Revenue Agency (CRA) has changed its authorization request service for individuals in its “Represent a Client” feature, the tax department announced Thursday.

The alternative process for individuals — where the taxpayer or their legal representative can authorize a representative using information from a previous notice of assessment — no longer includes a five-day processing time. Instead, representatives can now get instant access to their client’s account.

To use the new process, the authorization applicant can use the authorization request service in “Represent a Client” and get information from their client’s notice of assessment issued at least six months ago. Authorization requests can’t be submitted on behalf of other representatives.

Clients may authorize a representative instantly if they have access to CRA My Account and add the representative or confirm the authorization request submitted by the representative in “Represent a Client.”

Effective July 15, the “Authorize a Representative” service within EFILE software is no longer available for individual clients. Representatives must use “Represent a Client” to gain access. This change does not affect authorization requests submitted through EFILE for business clients.

Service from Canada Revenue Agency (CRA) contact centres continues to disappoint taxpayers — assuming taxpayers get through to the centres in the first place.

The latest annual report from the Office of the Taxpayers’ Ombudsperson finds that the top trend in complaints about the CRA’s services related to information provided by contact centre agents.

“Many taxpayers who were able to reach the CRA’s contact centres claimed that agents provided them with incomplete, inaccurate or unclear information, while others were unable to even reach an agent because the wait times were too long or they could not get into the queue,” said a release on Friday from the Office of the Taxpayers’ Ombudsperson.

The office aims to improve the CRA’s service by reviewing individual complaints. The annual report provided an overview of the office’s activities for the year ended March 31, 2025. Overall, 2,796 complaints were received about the CRA’s services, compared to 2,833 the year before.

“Our office is well aware of the public’s complaints about the contact centres,” the report said. “They are regularly one of the top complaint trends each year, and this year was no different.”

A 2017 report from the auditor general found that CRA call agents provided wrong information almost 30% of the time. In that report, the agency committed to measures such as training and monitoring agents. The auditor general plans to release another report this year on the CRA’s contact centres, Friday’s report said.

Also, a public opinion research study published in March 2024 that looked at taxpayers’ service expectations for CRA’s contact centres found that some callers phoned the CRA after having difficulty navigating the CRA’s website. As such, Friday’s report suggested that the CRA review its website architecture and content to ensure relevant and clear information is provided.

In addition to contact centres, complaint trends in the Taxpayers’ Ombudsperson report related to delays in processing tax returns, claims that the CRA failed to consider taxpayers’ personal circumstances when taking collection action and claims that the CRA burdened taxpayers regarding their eligibility for the Canada Child Benefit.

Complainants also said the CRA’s Service Feedback Program failed to respond to their complaints within the agency’s published service standard. (The two main ways that taxpayers can complain to the CRA are by calling the agency or submitting service feedback.)

The report also recommended that the CRA establish a grant program for organizations that provide income tax clinics to eligible taxpayers.

“[A] key focus of our office has been on how vulnerable, hard-to-reach non-filers can be better informed about the advantages of income tax filing,” such as receiving benefits, credits and other entitlements, the report said. To that end, other initiatives detailed in the report included automatic tax filing for eligible lower-income taxpayers.

The Taxpayers’ Ombudsperson report also detailed other activities this year, such as its review of the CRA’s administration of the 2023 bare trust filing requirements.

Proposed changes this week to the Trump administration’s tax bill take a bit of the sting out of its potential impact on taxpayers in Canada — among other countries — by lowering the cap on proposed increases to tax rates on U.S.-source income and by providing exceptions to an excise tax on money transfers from the U.S.

The tax bill, currently before the U.S. Senate, proposes a 3.5% excise tax on remittance transfers made by non–U.S. citizens to recipients outside the U.S. The proposal provides a refundable tax credit in cases where U.S. citizens, green card holders and those with work visas incur the proposed tax. But concern arose that the proposal could affect some cross-border clients, such as Canadians in the U.S. who plan to return to Canada to retire and who have U.S. accounts to draw from, or Canadians with U.S. property that they plan to sell.

Such concern has largely been allayed with the U.S. Senate’s proposed version of the bill, which includes exceptions when the funds being transferred are withdrawn from accounts at financial institutions subject to the U.S. Bank Secrecy Act — anti–money laundering legislation that applies to brokers and dealers, banks, credit unions and insurers, among other entities. The Senate finance committee also added an exception when the funds being transferred are funded with a U.S. debit or credit card.

“The language here seems to suggest that Canadians remitting money back to Canada from a typical U.S. bank or brokerage firm will be exempt from the 3.5% excise tax,” Matt Alto, president and CEO of MCA Cross Border Advisors Inc. in Montreal, wrote in an email. “Glad to see these changes to the bill are being made by the Senate committee.”

The additional wording “does seem like it would reduce the scope of the tax,” said Jason Ubeika, a partner on the expatriate tax team with BDO Canada in Mississauga, Ont. Still, he cautioned that generally, legislation must pass and rules must be established to provide certainty about changes to the Internal Revenue Code. The proposed excise tax is “a completely new tax,” requiring “a fair amount of regulations put forth to flesh it out,” Ubeika said.

One question is how U.S. financial institutions would handle the compliance burden of the proposed tax, said Max Reed, a cross-border tax lawyer and principal of Polaris Tax Counsel in Vancouver. They’ll be required to submit detailed information returns about their money transfers, and as such, the excise tax “could have broad implications for payment processors and financial accounts,” said BDO USA in an article on Wednesday.

Multiple countries could be impacted

The Senate finance committee also tweaked the bill’s proposed Section 899, which targets countries with taxes — including digital services tax and global minimum tax rules — deemed unfair to U.S. persons or businesses, making Canada among the many countries potentially affected. The Senate lowered by five percentage points the potential total U.S. tax rate increases on the targeted countries, and pushed out Section 899’s effective date.

Before the Senate’s proposed change, Section 899 increased, for example, U.S. withholding tax rates on a Canadian resident’s U.S.-source income, such as dividends from U.S. investments, by five percentage points per year (starting at treaty rates). In addition to Canadian investors, Section 899 would apply to Canadian businesses, investment funds, certain trusts, private foundations and the Canadian government. (U.S. citizens in Canada wouldn’t be affected.)

While the proposed measure had a cap of 20 percentage points above the statutory rate, the Senate version reduced the cap to 15 percentage points. For example, the potential top withholding tax rate on U.S. dividends would be 45% instead of 50%. U.S. withholding tax on U.S. real property dispositions would top out at 30%, instead of 35%.

Whether the Canadian government would increase foreign tax credits to cover increased U.S. withholding tax rates is unknown. “Even once we have that final [U.S.] legislation in hand, there’s going to be still a lot of questions that might take quite some time to resolve,” Ubeika said. “As well as waiting for guidance from the U.S., we might be also waiting for some guidance from Canada … as far as deductions or credits.”

The U.S. Senate’s version of the bill confirms that Section 899’s proposed increased rates don’t apply to portfolio interest, and it also defers the proposed tax hikes. The proposed measure would generally apply in 2027 instead of 2026, assuming a taxpayer has a calendar year-end.

“That’s more time to figure things out,” Ubeika said. “It gives other countries [including Canada] an opportunity to pivot if they need to, or to negotiate with the U.S.”

The proposed U.S. tax bill still must be passed by the Senate, and passed again in the House of Representatives before being signed by the president, with an original target date of July 4.

“That seems pretty ambitious … but it’s by no means a hard deadline,” Ubeika said, noting that negotiations will be ongoing in Congress over the bill’s various measures. “Realistically, these are provisions that [the Trump administration] would want to get enacted before the end of the year,” as was done with the 2017 Tax Cuts and Jobs Act.

Reed also noted that the bill has a lengthy process of negotiations ahead before being passed. Still, as things stand, “the important takeaway is that everybody [both House and Senate] is on board for some version of this chaos,” he said.

The Canada Revenue Agency (CRA) identified another issue causing incorrect assessments of some T1 tax returns claiming the lifetime capital gains exemption (LCGE), and the agency says it will reassess the affected returns beginning Tuesday.

In a LinkedIn post on Monday, Ryan Minor, director of tax with CPA Canada, shared communication from the CRA regarding a second issue with the calculation of the capital gains deduction.

“The issue that led to incorrect calculations … was resolved on May 22,” the CRA told CPA Canada, as shared in Minor’s post. The CRA will “proactively reassess the affected returns” beginning June 10.

In the LinkedIn post, Minor said “several” tax practitioners had informed CPA Canada that clients were receiving incorrect LCGE assessments on returns filed after April 21. On that date, the CRA had resolved one unspecified issue with the calculation of the capital gains deduction, discovered in early April 2025, as the agency confirmed in May. The CRA said it would proactively reassess those affected returns, and no action was required on the part of affected taxpayers.

Now, the agency will do the same for returns affected by the second issue.

As with the first issue, the CRA provided no specifics. “The good news is that it’s being fixed,” CPA Canada said in an email.

The LCGE, available for gains on the sale of small business shares and farming and fishing property, increased to $1.25 million from $1,016,846, effective June 25, 2024 — the date the now-defunct proposed increase to the capital gains inclusion rate was originally slated to take effect. (The CRA is administering the increased LCGE, although the measure still requires legislation.)

T1 and T3 schedules maintained the reporting of capital gains before and after June 25 of last year in line with the proposed increase to the capital gains inclusion rate, which was a complicating factor this tax-filing season.

In addition to incorrect assessments related to the LCGE, tax practitioners this tax-filing season dealt with missing tax slips or duplicate tax slips showing up in CRA portals, following changes to the electronic filing system used to upload slips. The challenge extended to TFSA annual information slips.

CRA statistics to June 2 indicate assessments have been conducted on about 30 million T1 returns for the 2024 tax year.

Update: On June 13, the CRA said TFSA information is now available in My Account for most TFSA account holders.

TFSA information isn’t available in Canada Revenue Agency (CRA) portals, but financial advisors and their clients aren’t sweating the (TFSA) details.

Aravind Sithamparapillai, a certified financial planner with Ironwood Wealth Management Group Inc. in Hamilton, Ont., said clients haven’t been calling to ask about TFSA contribution room. “We haven’t had as many of those calls because of [the] touchpoint I do at the beginning of the year,” he said, which includes TFSA discussions.

“I haven’t had a single question from a client” about TFSA contribution room, said Aaron Hector, senior wealth advisor and founding partner with TIER Wealth in Calgary. He also discusses TFSAs with clients early in the year.

Hector’s firm provides tax services and so typically has CRA account access for clients, but that’s no advantage this year. The CRA began using a new data validation process for the electronic filing system used by institutions to upload tax information slips, and on April 3, the CRA said some issuers had trouble uploading the slips, which made for a challenging tax season. The trouble extends to TFSA annual information slips.

As explained on the CRA’s website, TFSA contribution room is the total of the TFSA dollar limit of the current year ($7,000 in 2025), any unused TFSA contribution room from previous years and any TFSA withdrawals made in the previous year.

The CRA’s self-service My Account portal is updated each Jan. 1 to reflect the new annual TFSA dollar limit, and is updated again with adjustments to TFSA contribution room once financial institutions’ annual TFSA information slips — due the last day of February — have been processed by the CRA.

In an email on Friday, CRA spokesperson Sylvie Branch wrote that issuers of information slips “had to get accustomed to the new system, adapt to new processes and, most importantly, contend with stricter validation of the data they submit to the CRA. These stricter validations and new processes caused delays in receiving and processing the information returns this year,” including TFSA annual information returns.

“Resolving our system issues is our priority, so that we can update TFSA information in My Account as soon as possible,” Branch wrote.

The CRA had no date for when the update would occur. “We regret the inconvenience and thank taxpayers for their patience,” the email said.

If a taxpayer doesn’t correctly calculate their TFSA contribution room, they could mistakenly overcontribute. Penalties for overcontributions are 1% per month on the excess amount, and many months could pass before a taxpayer becomes aware of an overcontribution.

“It is each taxpayer’s responsibility to maintain their own records and to compare them against their financial institution’s records as well as the information on My Account,” Branch’s email said. (The CRA has a worksheet to help calculate TFSA contribution room.)

With longstanding clients, calculating TFSA contribution room is “relatively easy” by consulting a multi-year transaction log, Hector said, assuming the client has no other TFSAs with other financial institutions.

Markus Muhs, senior portfolio manager with Muhs Wealth Partners and CG Wealth Management in Edmonton, said he’s received a few client inquiries this year about TFSA contribution room. “I bet there’s a lot of people with self-directed TFSAs [and] no adviser to stop them” from overcontributing, he said. “If they didn’t look a little bit deeper [to track their TFSA contribution room], they probably put themselves in a bad position.”

Even in a typical year, “the information on CRA’s website is never accurate in the first two or three months of the year,” given financial institutions have until the end of February to report the information, Hector said. Further, in past years, “we’ve had instances where we’ve had to go back to the financial institution” because it hadn’t provided information to the CRA.

“I’ve generally told [clients] you can’t trust that number,” Muhs said, referring to TFSA contribution room shown in My Account. “You have to keep track of it yourself.” He also tells clients to review TFSA transactions in My Account, not just the initial contribution limit shown, as a way to ascertain if the information is current (in a typical year when My Account has TFSA information).

In an email, Wilmot George, managing director of tax and estate planning with Canada Life in Toronto, said, “The CRA might not receive TFSA transaction records for the prior year until the end of February each year, which can result in inaccurate contribution limits from the CRA for the first couple months of the year.” Further, “reporting mistakes by financial institutions and the CRA might occur from time to time, so taxpayers should have some idea of how to calculate their contribution limits (or at least recognize errors) to avoid excess contributions and related penalties.”

While tracking TFSA contribution room is ultimately the responsibility of the taxpayer, “many are still learning about the TFSA and how it works, and most are not trained in calculating TFSA contribution room, especially when withdrawals have occurred,” George wrote.

Helping clients keep track of TFSA contribution room is table stakes for advisors and should be part of reviews with clients, Muhs said.

The clients who most need help tracking contribution room tend to be in a middle category, Sithamparapillai said — in between the high-net-worth clients who max out their TFSAs at the beginning of each year and the young families with expenses, who may be focused on RRSP savings. The client in the middle category may receive an inheritance, bonus, company shares or promotion, and want to make a one-time contribution or establish a more aggressive contribution schedule. “That’s the area where the really nuanced calculations or tracking comes into play,” Sithamparapillai said.

As he does with clients’ activity in other registered accounts such as RESPs, registered disability savings plans (RDSPs) and first home savings accounts (FHSAs), Sithamparapillai has started keeping a tally and personalized notes about clients’ TFSA contribution room, including contributions and withdrawals. (CRA portals don’t include information about contributions to RESPs and RDSPs, he noted.) That way, whenever clients have money to make a contribution — they receive a lump-sum payment, say — Sithamparapillai has the numbers at hand.

The process is efficient for client discussions, he said, and “clients find it valuable to have that information at a moment’s notice.”

Managing registered accounts

In preparation for client meetings at the beginning of the year — and discussions about registered accounts — Sithamparapillai collects clients’ year-end paystubs, which informs him of clients’ income and pension or group RRSP contributions (including employer contributions). Combined with other information such as previous notices of assessment, “I can get a pretty good proxy … of what their effective marginal tax rate is,” he said. Benefits, such as the Canada Child Benefit, are also considered.

Hector says he asks clients whether they plan to have children (or more children). “The piece … a lot of people miss in that [TFSA vs. RRSP] conversation is the family plan,” he said. “You might be in a middle tax bracket, but when you add on the Canada Child Benefit … you’re probably pushing up into a top marginal tax bracket or approaching it.”

Based on the client’s effective marginal tax rate, Sithamparapillai explains to clients (and, potentially, to their accountant or bookkeeper, he said) whether a TFSA or RRSP contribution makes more sense. Clients’ projected tax bracket at retirement is also considered.

Part of the discussion is about where contributions will come from, which, in the case of an RRSP contribution could be from a TFSA. “If you’re pulling from your TFSA room, then we have some additional contribution room [that becomes] available,” he said, referring to TFSA contribution room for the year after the withdrawal, not the current year.

If a client is on the fence about the RRSP vs. TFSA decision, “I would usually err to using the [TFSA], because it’s just so flexible,” Hector said. “It’s really easy to take money out of a TFSA a year or two down the road and move it into the RRSP. Going the other direction just does not work.”

While each client’s situation is different, Muhs said, generally, clients take advantage of both TFSAs and RRSPs as their incomes grow.

Sithamparapillai typically suggests clients don’t open multiple TFSAs with multiple financial institutions, which complicates tracking contribution room.

Muhs too advises clients against having more than one TFSA. “You can do multiple things with one TFSA,” he said, including having an emergency fund, short-term savings and longer-term investments for retirement. “Some people don’t realize that.” Also, an advisor should ask a client if they have TFSAs that the advisor doesn’t know about, he said.

Muhs also suggested some TFSA holders would benefit from an overcontribution cushion, as with RRSPs. Generally, taxpayers must pay a tax of 1% per month on contributions that exceed their RRSP deduction limit by more than $2,000. Implementing such a measure for TFSAs would make them more user-friendly, he said.

As things stand, he tells clients who make sporadic TFSA withdrawals and contributions to consider leaving themselves a little bit of TFSA contribution room as a precaution against overcontribution.

“You don’t have to max it out fully,” Muhs said. “Give yourself a cushion, because we’ve got lots of [TFSA] contribution space now.”

The total contribution room available for someone who has never contributed to a TFSA and has been eligible to do so since its introduction in 2009 is $102,000.

Here are the TFSA dollar limits by year:

2009 – 2012: $5,000

2024 – 2025: $7,000

2023: $6,500

2019 – 2022: $6,000

2016 – 2018: $5,500

2015: $10,000

2013 – 2014: $5,500

The Trump administration’s tax bill currently before the U.S. Senate includes a proposal that would tax money transfers from the U.S. sent by non-U.S. citizens, with potential implications for some cross-border clients.

One of the bill’s proposals is a 3.5% excise tax on remittance transfers made by non-U.S. citizens in the U.S. (and by non-U.S. nationals, such as those in a U.S. territory) to recipients outside the country. U.S. financial institutions and money transfer providers would be required to submit detailed information returns about their money transfers, and the measure would take effect in 2026. The proposal provides a refundable tax credit in cases where U.S. citizens, green card holders and those with work visas incur the tax.

The measure “seems to be designed to punish non-U.S. citizens who are sending money back to their home countries,” said Matt Altro, president and CEO of MCA Cross Border Advisors Inc. in Montreal. “This is basically … a 3.5[%] net worth tax for some people.”

The remittance excise tax could affect cross-border clients in the U.S. (non-U.S. citizens) who plan to move to Canada to retire and have U.S. accounts to draw from. The proposal “is a concern for sure for our clients,” Altro said. “This can affect their cross-border planning and their financial plans.” Altro said he’s thinking about strategies to potentially repatriate an affected client’s U.S.-based funds without being caught by the proposed measure.

A KPMG report suggests relief from the excise tax could be available under non-discrimination articles included in some tax treaties. Also, the report said the measure possibly wouldn’t apply to “an entity acting as an employer that directly deposits some or all its employees’ wages in a non-U.S. bank account.”

With the proposed U.S. tax bill overall, “we have to start thinking about the implications and being prepared,” Altro said. “But we must wait and see” as the bill makes its way through the U.S. Senate.

Hike in tax rates for U.S.-source income

The bill’s Section 899 amends the Internal Revenue Code to target countries with taxes deemed “unfair” to U.S. persons or businesses, including digital services tax and global minimum tax rules, making Canada among the many countries affected. Section 899 would apply to Canadian businesses, investors, investment funds, certain trusts, private foundations and the Canadian government. (U.S. citizens in Canada wouldn’t be affected.)

The section hikes U.S. withholding tax rates on a Canadian resident’s U.S.-source income, including dividends, interest, royalties and rent, and on effectively connected income (ECI) — income related to a U.S. trade or business, including capital gains from U.S. real property. The proposed increase to tax rates is five percentage points per year (starting at treaty rates),* up to a maximum of 20 percentage points above the statutory rate.

For example, dividends paid to a Canadian parent company from a U.S. subsidiary would be subject to greater withholding tax, as would dividends paid to Canadian investors from their U.S. investments. (See table below for rates.)

“With Canada being only 3% of the world market, so much of us are invested and our clients are invested in U.S. stocks,” Altro said. For now, “we’re not going to be changing all of our clients’ portfolios out of U.S. stocks,” he said, but he’s informing clients of the potential changes.

As the bill makes its way through the U.S. Senate, modifications could be made, said Laura Gheorghiu, partner with the national tax group at Gowling WLG in Montreal.

Still, the proposed tax hikes on U.S.-source income would be significant, given foreign tax credits on the Canadian side would no longer mitigate the U.S. tax.

“That’s the big issue — the credit being limited,” Altro said. “That would be very punitive…. You have a misalignment now,” of U.S. tax and Canadian tax credits, and it’s unclear whether Canada would adjust the foreign tax credit higher, he said.

Canadian residents (non-U.S. citizens) holding U.S. individual retirement accounts (IRAs) could be hit hard, Phil Hogan, cross-border tax partner with Beacon Hill Wealth Management Ltd. in Victoria, B.C., wrote in a blog post: “Unlike smaller dividend or interest payments, IRA distributions are often much larger, amplifying the impact of any tax hike.”

While Canadian registered retirement accounts such as RRSPs aren’t subject to withholding tax on U.S. dividends given the accounts are tax-deferred, the proposal may change that, Altro said. If so, Canadians would be paying tax twice on those dividends: once in a given tax year on the U.S. side with no credit to offset it, and again on withdrawal.

If that’s the case, the proposal targets “a pretty broad part of the population,” he said, and is “disincentivizing” Canadians from investing in U.S. securities.

“Understanding your [U.S.] exposure is really important,” Gheorghiu said. However, she suggested investors and business owners be patient. U.S. legislators “are overriding [tax] treaties, and that’s a big deal,” she said, potentially requiring negotiations and changes.

On Wednesday, a U.S. federal court ruled that Trump has no authority, through a national security statute, to wield the sweeping tariffs imposed on dozens of countries in April.

The proposed tax rate increases, if enacted, could apply to Canada 90 days after enactment. Proposed rate increases would remain in effect until Canada’s “unfair” taxes were dropped.

Transitional relief of penalties and interest would be provided through Dec. 31, 2026, for withholding agents, assuming best efforts to comply.

While uncertainty remains about the U.S. tax bill and how section 899 would interact with the Canada-U.S. tax treaty under U.S. law, what’s clear “is that third-party withholding agents will err on the side of caution and withhold at the new, higher penalty rate regardless of any treaty-based position,” said a blog post by Polaris Tax Counsel in Vancouver.

“We’re not in this alone — I think that’s an important thing to keep in mind,” Gheorghiu said. “These rules apply to a very large number of countries,” requiring a concerted response to address U.S. concerns.

*A previous version of this story stated that rate increases would be applied for four years. That time frame is incorrect and has been removed from the text and table. Return to the corrected sentence.

Some taxpayers claiming the lifetime capital gains exemption (LCGE) for capital gains on or after June 25 are having their tax returns assessed incorrectly, tax practitioners say.

The LCGE, available for gains on the sale of small business shares and farming and fishing property, increased to $1.25 million from $1,016,846, effective June 25, 2024 — the date the now-defunct proposed increase to the capital gains inclusion rate was originally slated to take effect. (The CRA is administering the increased LCGE, although the measure still requires legislation.)

In an email, Ryan Minor, director of tax with CPA Canada, said “several” of the organization’s members raised concerns that “individuals are being assessed incorrectly” when the LCGE is claimed for dispositions on or after June 25. For example, an assessment based on a lower LCGE limit than claimed may be the result of a calculation that doesn’t include inflation adjustments. The CRA hasn’t confirmed the cause of the incorrect assessments, Minor said.

“We are seeking advice from the CRA as to what individuals in this situation should do,” he said in the email. “We are hoping that the CRA will proactively reassess taxpayers in this situation,” without the taxpayer having to file an objection or T1 adjustment request.

T1 taxpayers with capital gains to report (including capital gains on T3 tax slips) have until June 2 to file their returns — an extension announced on Jan. 31 when the Finance Department deferred the proposed increase to the capital gains inclusion rate, which the Liberals have now dropped. (These T1 taxpayers’ spouses generally didn’t get the filing extension, although the CRA previously told CPA Canada that spouses are eligible for the extension when it comes to any forms and elections, including T1135s, normally included with T1 returns.)

In addition to incorrect assessments related to the LCGE, tax practitioners this tax-filing season dealt with missing tax slips or duplicate tax slips showing up in CRA portals, following changes to the electronic filing system for slips.

Also, T1 and T3 schedules maintained the reporting of capital gains before and after June 25 of last year in line with the proposed increase to the capital gains inclusion rate, which has been a complicating factor this season.

In an emailed response on Friday to an earlier query about resolving the tax-filing issues, including the LCGE issue, the CRA didn’t directly reference the LCGE. However, the agency said it “made significant progress in returning to regular processing timelines” for the validation of tax slips. “Processing occurs in stages, and some tax slips may still be pending as we work through inventories — this is expected each filing season,” CRA spokesperson Nina Ioussoupova said in the email.

On its website, the Canadian Federation of Independent Business (CFIB) describes the LCGE as a tool to help many small business owners save for retirement or invest in another small business. “Most entrepreneurs don’t have pensions and rely on the ultimate sale of their business, together with the protection of the LCGE, as their retirement plan,” it says.

In an interview, CFIB president and CEO Dan Kelly said the organization sent a letter to Prime Minister Carney, asking for legislative action on “unfinished business” from the Trudeau government. “We want that legislation passed,” he said of the LCGE.

While Carney has said his government will proceed with the increased LCGE, he’s been silent on the proposed Canadian Entrepreneurs’ Incentive (CEI), Kelly noted. Referring to the CEI, “it’s not a perfect measure, and I think it needs some further fixes,” he said. “But it is a good measure, and we are advising governments to proceed with that.”

The proposed CEI would reduce the inclusion rate to one-third on a lifetime maximum of $2 million in eligible capital gains when an entrepreneur sells their business. The lifetime limit would be phased in at $200,000 per year, beginning on Jan. 1, 2025, before reaching $2 million in 2034.

Regarding the dropped proposal to increase the capital gains inclusion rate, Kelly said that “there’s no question” some business owners made disposition decisions based on the proposal. “About 4% of our members said they triggered the sale of their business through shares,” he said, and about 6% sold investments held corporately. Those who sold the business may have “moved faster than they would otherwise have,” Kelly said.

The CFIB has also asked for legislation to formally eliminate the carbon tax, ensuring the small business carbon tax rebates are delivered tax-free and returning the remaining $500 million in 2024–25 carbon tax rebates to small businesses.

Ahead of the upcoming federal election, tax experts are describing the Conservatives’ proposal to defer capital gains tax when reinvesting in Canada as a game-changer for tax planning.

To boost domestic investment, the Conservative Party of Canada proposed the Canada First Reinvestment Tax Cut, which would allow capital gains tax deferral when an asset sale’s proceeds are reinvested in active Canadian businesses. The measure would apply for a limited period — from July 1, 2025, to Dec. 31, 2026 — with the potential to be extended.

“What this policy would do if it goes forward is allow you … to get an unlimited deferral — in other words, unlimited in dollar amount and unlimited in time — by simply reinvesting in a Canadian asset,” said Jamie Golombek, managing director of tax and estate planning with CIBC Private Wealth in Toronto. “I think it actually will change the entire game in terms of tax planning.”

Golombek made his comments during a webinar on Thursday from Canadian Tax Matters, hosted by Kim Moody, founder of Moodys Private Client Law LLP in Calgary, and Jay Goodis, CEO of Tax Templates Inc. in Toronto.

While what qualifies as a Canadian asset would need to be defined, Golombek said he was “excited” about the proposed measure and described it as a “dramatic change in tax policy” that would influence taxpayer behaviour.

Specifically, the proposal would help overcome the “capital gains lock-in effect,” whereby a taxpayer puts off selling an asset that has reached its potential, because the taxpayer doesn’t want to incur capital gains tax (about 26% for a top earner in Ontario, for example).

“Tax really does cause people to delay selling an asset that they otherwise would, which means we have clients [with] portfolios that are entirely skewed because of the recent success of some of the [U.S.] tech stocks,” Golombek said. The proposal would allow them to re-diversify their portfolios by selling those stocks and investing in Canadian stocks and funds, he said.

Based on the proposal, “it seems to me that you would get an indefinite deferral of that capital gain,” Golombek said —  including a deferral to death or to a spouse’s death (in the case of a rollover when the first spouse dies).

Moody suggested that the definition of taxable Canadian property under Section 248 of the Income Tax Act, which includes Canadian securities, could be refined for the purposes of the proposal. Moody also noted that the measure aims to parallel the U.S. like-kind exchange rules from Section 1031 of the Internal Revenue Code, although those rules are permanent and more broad.

As things stand, the Income Tax Act allows capital gains deferral under replacement property rules, which may cover dispositions of property used in a business or the disposition of eligible small business corporation (ESBC) shares that are reinvested in shares in another ESBC. But these replacement property rules are of “very limited use,” Moody said.

Golombek noted the Conservatives’ proposal would likely be complicated to administer. But overall, “I’m pretty interested in this from a pure policy perspective,” he said, as a way to reallocate assets into a more productive use.

In an article in The Hub, Jack Mintz, President’s Fellow, School of Public Policy, University of Calgary, projected that the proposal would generate $12.4 billion in capital investment and increase GDP by $90 billion by the end of 2026.

However, the proposal comes with risk when disposing of certain assets outside Canada, such as foreign real estate. If a client sold a Florida condo, for example, and planned to defer the capital gain, they may not be able to take advantage of the foreign tax credit.

“The foreign tax credit rules … are very limiting,” Moody said. Depending on the proposal’s details, “if you’re triggering … any foreign tax … more than likely you’re going to have a [tax] mismatch and thus expiring foreign tax credits.”

Proposed cuts to lowest tax bracket decrease value of tax credits

Both the Liberals and Conservatives proposed cutting the lowest federal tax bracket — to 14% and 12.75%, respectively — from the current 15%.

Golombek described the proposals as “a universal tax cut across the board,” given all taxpayers fall within the lowest tranche of income ($57,375 or less for 2025).

However, cutting the lowest bracket affects almost all tax credits, including the basic personal amount and pension income credit. The credits are “based on a factor, and under the Income Tax Act, that factor is defined as the lowest tax bracket,” Golombek said, so credits would be worth less under these proposals.

An analysis by the C.D. Howe Institute shows that this reduced value is significant. For example, under the 12.75% tax rate, the average pre-credit savings for taxpayers is $905, while the average loss from non-refundable credits is $483.

Golombek suggested that the winning political party may adjust its proposal to preserve the value of tax credits.

Planning tips for proposals related to seniors

The Conservatives proposed increasing the age at which an RRSP must be converted to a RRIF to 73 from 71, and the Liberals proposed reducing mandatory minimum RRIF withdrawals by 25% for one year.

With the Conservative proposal, taxpayers could contribute to their RRSPs for two more years if they have earned income, which includes rental income, Golombek said.

Regarding the RRIF-related proposal, he suggested that if a taxpayer hasn’t made their annual minimum RRIF withdrawal yet and doesn’t need the withdrawal for expenses, they may want to wait before making a withdrawal.

“The practical advice here is stop taking money out of your RRIF until you find out what this proposal is,” Golombek said, which means waiting until after the election, and if the Liberals win, waiting for the budget with the proposal’s full details.

The Conservatives have also proposed increasing the tax-free income threshold for seniors via enhanced tax credits that would create zero tax liability on the first $34,000 of employment or self-employment income.

Seniors currently get the basic personal amount ($16,129 in 2025 for taxpayers with net income of $177,882 or less) plus the age amount credit (a maximum of $9,028 in 2025) — for a total of about $25,000 tax-free for taxpayers age 65 and older who aren’t subject to clawback of the age amount credit.

While the proposal is beneficial, “it’s a very limited benefit,” Golombek said, given it’s for working seniors. “That extra $9,000 of tax-free income for a senior would have to be in the form of employment or self-employment income, and cannot be interest income on your GICs or dividend income on your bank stocks,” for example, he said.

Proposed TFSA top-up of $5,000: Not a diversification disadvantage

The Conservatives proposed allowing taxpayers to contribute an extra $5,000 a year to their TFSAs (up from $7,000), specifically for investment in Canadian companies.

Again, Moody said he expects the definition of taxable Canadian property under Section 248 would be “carved up” to be appropriate for the proposal, so that Canadian securities would be eligible investments for the top-up amount. “That would be my guess,” he said.

As noted in the webinar, the proposal would incentivize investing in Canadian assets without restricting global diversification. Between 1971 and 2005, RRSPs and pension plans had foreign content limits of 10% to 30%, but the restriction was eliminated to prioritize global diversification.

Total TFSA contribution room available in 2025 for someone who has never contributed to a TFSA and has been eligible to do so since its introduction in 2009 is $102,000. Given the proposed extra $5,000 represents less than 5% of that total, “I don’t think that the $5,000, requiring that to be in Canada, would … put [investors] at a disadvantage” from an investment diversification perspective, Golombek said.

Two weeks out from the tax-filing deadline, the Canada Revenue Agency (CRA) says incorrect error codes are preventing some taxpayers from filing their tax returns.

“A system issue” is “triggering incorrect error codes in EFILE and NETFILE certified software and is preventing some users from being able to submit returns,” the CRA says on its website.

The agency says it is “actively working to resolve these issues as quickly as possible” and will provide further information when available.

“This is something at the CRA end,” said Ryan Minor, tax director with CPA Canada, referring to the error codes. “The returns have nothing wrong with them, but they’re getting flagged with these errors for some reason.”

If the problem isn’t resolved by the April 30 tax-filing deadline, the CRA says it will provide arrears interest and penalty relief “proactively” to affected taxpayers who file late after receiving an incorrect error code that could not be resolved when attempting to file on or before the tax-filing deadline.

To be eligible for that relief, the CRA says taxpayers must have attempted to submit their returns electronically on or before April 30, received the specific error code (the list of error codes is online), and been unsuccessful in resolving the error code despite taking the appropriate corrective action.

Accounting firms may have to deal with “lingering returns” that require attention after tax-filing season, Minor said. “This adds another complication to an already rough tax season.”

Another filing issue is the duplication of tax slips such as T4As and T4RIFs in CRA accounts. A discussion among tax practitioners on LinkedIn included the example of a taxpayer with duplicate T4As when auto-filling the tax return. The duplication, gone unnoticed, could affect clawback of old age security.

“The issue with the duplicate slips is very likely related to the problem with filing the slips initially,” Minor said. This year, changes were introduced to the electronic filing system that institutions use to file slips.

It seems that “slip filers who are thinking they weren’t successful filing a previous time are filing again,” Minor said. “And these are sophisticated places.” If big firms with staff and finance departments are having problems, “what are the smaller places supposed to do?” he said.

CIBC Mellon notified taxpayers whose pension payments it administers that the CRA’s system uploaded duplicate tax slips to some plan members’ MyCRA accounts. The firm says in its notice that it is working with the CRA to cancel the duplicated slips and instructs plan members who want to file their tax returns how to review the slips to confirm they’re duplicates.

“In general, there is a lot of trouble getting slips uploaded” this tax-filing season, Minor said, noting the problem of slips not appearing in the CRA’s portals or Auto-fill my return service. “You’ve got slips that are not there, and then you’ve got slips that are there twice to worry about.”

Regarding a taxpayer with duplicate T4As or other income slips, “you’ve really got to make sure the income that’s being reported is legitimate,” Minor said. “If there’s a double reporting of slips, you have to know to ignore the second one.” That could require extra communication between clients and tax practitioners, he suggested.

Minor said he’s asked the CRA if the agency can delete duplicate slips with no extra work on the part of slip issuers, and he’s waiting to hear back.*  The University of British Columbia says on its website that it received confirmation from the CRA that duplicate T4As were deleted and should disappear from individual CRA accounts.

Minor also noted that duplicate tax slips will likely cause a problem with the CRA’s matching program in which the agency matches what a taxpayer reports with the taxpayer’s slips. Instead of automatically reassessing a taxpayer when a discrepancy arises, the CRA may have to be more cautious, he said, and potentially send query letters to taxpayers.

“There could be some more work after [tax-filing season] for taxpayers to clarify that slips are duplicate or not — depending on what the CRA is able to do to weed out these duplicate slips,” Minor said.

Tax practitioners have to be extra diligent this filing season, he said, given the complications with tax slips. “Preparers have to be doubly cautious to make sure they’ve got everything and they’re not double reporting,” he said. “It’s adding a lot of time on the part of preparers. The importing of slips is usually a time saver. Now, you’ve got extra steps for quality control.”

The CRA hasn’t said anything about extending the filing deadline because of duplicate slips. “You’re still required to get the physical slips, so it doesn’t seem like [the CRA] is going to go down the road of giving any kind of relief for filing deadlines, other than the capital gain–related one for impacted filers.”

When filing a return and using auto-fill, a taxpayer must ensure all fields on the return are filled in correctly and that the information is accurate and complete, the CRA says on its website. “It is your responsibility to contact the issuer for any missing or incorrect tax slips,” it says.

The CRA provided additional time for taxpayers reporting capital gains — in response to the deferred and now-defunct proposed increase to the capital gains inclusion rate — to meet their tax-filing obligations. The agency granted relief of late-filing penalties and interest until June 2, 2025, for individual filers and until May 1, 2025, for trust filers.

*Update: The CRA has since told Minor that it will rectify duplications without further action from slip filers, and slip filers should avoid submitting amendments to remove the duplicates. Return to the original sentence.