Opinion: CRA can improve its administration of bare trusts and the Canada child benefit

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.