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.

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.

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.

A review of how the Canada Revenue Agency (CRA) administered the 2023 filing requirements for bare trusts finds that the main issue was burdensome legislation.

“[T]he primary barriers the CRA faced in its administration of the bare trust filing requirements were not administrative but legislative, because the concept of bare trusts in the legislative wording was too broad,” says a report from the Office of the Taxpayers’ Ombudsperson, dated March 5. It describes the legislation as “burdensome.”

Expanded reporting requirements for bare trusts were supposed to kick in for the 2023 tax year. But after the new rules sparked widespread confusion, the CRA provided a filing exemption for bare trusts just days ahead of the tax filing deadline.

“Taxpayers and representatives should not have been left to spend months trying to understand the legislation when the CRA ultimately exempted bare trusts from the filing requirements,” the report says, noting that some tax professionals weren’t comfortable billing clients following the announced exemption.

“All of this was wasted time and effort,” the report says.

Despite the filing exemption for 2023, the CRA told this publication in early July 2024 that 52,000 trust returns had been filed for bare trusts for 2023. These taxpayers can’t be compensated for their legal and accounting costs, because the Income Tax Act includes no provision for the CRA to do so. As such, “many may have lost confidence in the tax system,” the Taxpayers’ Ombudsperson report says. (The report also notes that these taxpayers’ bare trust information won’t be removed from the CRA’s databases, because the agency has a legal obligation to retain the information.)

The review overseen by the Taxpayers’ Ombudsperson, François Boileau, considers the CRA’s role in administering and enforcing the trust reporting legislation (as opposed to Finance’s role in creating it). The resulting recommendations are that the CRA review its collaboration with stakeholders and with Finance Canada as well as its communication with taxpayers, and also assess whether a unique filing form for bare trusts is needed for easier reporting.

Leadup to the review

Expanded trust reporting legislation, aimed at transparency of beneficial ownership information in order to counter tax evasion, passed in 2022 and was effective for trusts with year-ends on Dec. 31, 2023, and after. With the rules, the majority of trusts, including bare trusts, are required to file a T3 return on time or face penalties. (Under previous legislation, generally only trusts with taxes payable for the year or those that disposed of capital property needed to file an annual trust income tax return.)

In a bare trust arrangement, the trustee generally holds legal title to the trust property but is unable to take any action without direction from all beneficiaries. Examples of bare trusts could include co-signed mortgages and joint bank accounts.

“[M]any taxpayers may not know they are in a bare trust arrangement,” the Taxpayers’ Ombudsperson report says. “This could be a parent who controls their child’s bank account or co-signing their child’s mortgage, or a child who is helping their aging parents by helping them manage their bank account.”

Given the challenges with the expanded reporting, the CRA provided a blanket filing exemption to bare trusts for the 2023 tax year at the end of March 2024, mere days before the trust return filing deadline of April 2, 2024. The last-minute reversal led to widespread frustration among tax practitioners and taxpayers, prompting the review by the Taxpayers’ Ombudsperson.

“The public wanted answers, and we wanted to examine if the CRA’s service-related processes could be improved,” the report detailing the review says.

CRA communication failures

While the CRA took steps to communicate the new trust reporting legislation, the agency was “limited in the guidance it could provide [about bare trusts] because it had no legal authority to provide legal advice to taxpayers,” the report says.

“Whether or not a particular arrangement is a bare trust depends on the specific facts of each situation, as well as the applicable law,” it says. “In addition, the legal principles applicable to trust relationships vary depending on the relevant province or territory.”

Also, the CRA didn’t provide “relatable” and “clear” examples of bare trusts to help taxpayers, the report says. It also calls out a lack of timeliness, saying the CRA released information on bare trusts one year after the legislation passed. The lack of timely communication contravened certain taxpayer rights and increased compliance costs.

“We heard of small businesses that spent thousands of dollars on hiring new staff, training employees, and filing returns for clients” and “that some tax preparers hired lawyers to support their team and help make sense of their clients’ compliance obligations,” the report says. “It was not helpful that the CRA provided information after tax preparers had already completed preparations and training for the upcoming tax season.”

The report also questions the length of time it took the CRA to consider a filing exemption. “Specifically, we do not know why the CRA did not provide an exemption in November 2023 instead of approving penalty relief,” it says. “The justification provided to senior CRA executives for the penalty relief did not appear to differ greatly from what was provided for the filing exemption.”

Once the exemption was finally announced, bare trusts that had already filed “did so for no reason, and in many cases at great expense,” the report says. By March 12, 2024, 4,652 bare trusts had filed, it says. (On March 12, the CRA said it would apply a gross negligence penalty in only the most egregious cases in which a bare trust failed to file.)

Between the exemption announcement on March 28, 2024, and Aug. 1, 2024, 9,665 bare trust T3 returns were filed — 18% of all bare trust T3s filed for 2023. The post-exemption filing was potentially because the exemption was communicated via a tax tip rather than a news release, the report says. It also notes that the CRA’s waiving of late-filing penalties for bare trusts in November 2023 and its subsequent 11th-hour exemption announcement could have affected trust in the agency.

“The CRA has to be more careful in what it does so that the trust it has built up with Canadians is not eroded by changing its position at the last minute,” the report says. “It informed taxpayers when it announced the exemption that it would work with Finance Canada to provide clarity in the coming months — taxpayers could be served better. Clarity should have been provided to taxpayers well in advance of the filing deadline.”

Overall, the CRA didn’t minimize the time, effort and costs that taxpayers had to incur to comply with the new filing requirements, the review found. The report recommends that the CRA determine, by June 30, 2025, whether to introduce a unique form for bare trusts’ filing requirements. The five-page T3 and two-page Schedule 15 “would be daunting for many who are not accountants or lawyers,” it says.

It also notes that not all information requested on the T3 may be relevant for a particular bare trust. “It may have been more helpful if the CRA were to have unique T3 returns for bare trusts that would only include the relevant fields,” it says.

The report also recommends that the agency conduct an internal review, by March 31, 2026, of how it collaborates with stakeholders when legislative amendments have been enacted, and also review — by the same date — how it works with Finance when administering a legislative proposal could increase taxpayers’ compliance costs.

“The CRA should consult with stakeholders early on, even before legislation comes into force, to ensure it is aware of any feedback and concerns there may be so that it can develop an action plan to address them in a timely manner,” the report says. The CRA only met with stakeholders six months after the new trust rules became law, it notes.

The CRA’s interactions with Finance should be considered in the context of compliance costs and legislative clarity, the report says.

It also recommends that the CRA review, by March 31, 2026, how it communicates updates to taxpayers through tax tips and news releases.

Finally, it suggests that the CRA create an “adaptable guide,” by March 31, 2027, to help it streamline how it administers changes to tax legislation. The guide would ensure changes to tax and benefit information are released in a timely matter and understood by the average taxpayer, it says.

The Taxpayers’ Ombudsperson review was conducted in consultation with stakeholders, including CPA Canada, taxpayers and the CRA. Ryan Minor, tax director with CPA Canada, said in an email that the organization was “pleased” with the report’s recommendations.

Bare trusts and proposed amendments

On Aug. 12, 2024, technical amendments to the trust reporting legislation, which effectively removed the filing requirement for 2024 and exempted more bare trusts from the expanded trust reporting rules, were published for consultation.

Because it was unlikely a bill with the proposed amendments would receive royal assent before tax practitioners began planning for tax season, in October 2024 the CRA announced a filing exemption for bare trusts for the 2024 tax year (unless the agency directly requests a trust to file).

“We hope the final legislation will be available well in advance of the deadline for filing returns, giving the CRA sufficient time to educate the public on their obligations,” Minor said, referring to the 2025 tax year.

He also noted that during the consultation, the Joint Committee on Taxation of the Canadian Bar Association and CPA Canada asked for “more workable exemptions covering common low-risk situations.”

Under the draft legislation, a trust — including a bare trust — is exempt from a filing requirement when all trustees and beneficiaries are related to each other; the property’s fair market value (FMV) doesn’t exceed $250,000; and the trust’s assets consist of only cash, GICs, mutual funds, personal-use property and securities traded on a designated exchange (as well as certain other assets).

The draft legislation retains the filing exemption for trusts with a FMV of $50,000 or less, but no longer restricts the assets these trusts can hold to be eligible for the exemption. In addition, the trustees and beneficiaries don’t need to be related to be eligible for the $50,000 exemption.

The proposed legislation also provides a filing exemption to an arrangement in which individuals are on legal title to real property that would be the principal residence of one or more legal owners, and all legal owners are related. The provision would be effective for trusts with year-ends of Dec. 31, 2025, and later.

Certain trusts are excluded from the expanded reporting rules, including graduated rate estates, qualified disability trusts, mutual fund trusts and registered plans, trusts in existence for less than three months, and trusts with less than $50,000 in asset value.

With files from Rudy Mezzetta.

This story was updated on Feb. 19 with more information about the Canada carbon rebate supplement.

Online tax filing begins on Feb. 24. To help taxpayers prepare, the Canada Revenue Agency (CRA) highlighted on Thursday several tax changes for the 2024 tax year and beyond.

Capital gains. Finance deferred the proposed increase to the capital gains inclusion rate to 2026. The CRA is providing additional time for taxpayers reporting capital gains to meet their tax filing obligations. It will grant relief of late-filing penalties and interest until June 2, 2025, for individual filers and until May 1, 2025, for trust filers.

Alternative minimum tax (AMT). Introduced for 2024 and later tax years, AMT changes include an increase to the minimum tax rate, to 20.5% from 15%, and an increased basic exemption threshold, to the start of the fourth federal tax bracket ($173,205 in 2024) from $40,000.

There are also changes to the calculation of adjusted taxable income for AMT purposes, the special foreign tax credit, and the minimum tax carryover. The changes also limit the value of most non-refundable tax credits. See Line 41700.

Canada carbon rebate (not available in B.C., the Northwest Territories, Nunavut, Quebec or the Yukon). This tax-free rebate helps eligible individuals and families offset the cost of the federal pollution pricing, and consists of a basic amount and a supplement for small and rural communities.

Under proposed changes, eligibility for the supplement will be expanded to include those who reside within a census rural area or small population centre (less than 30,000 people) in a census metropolitan area, as designated by Statistics Canada. Eligibility for the supplement will be based on the geographical designations from the most recent census published before the tax year.

In a LinkedIn post, Ryan Minor, director of tax with CPA Canada, shared communication from the CRA that said the proposed changes will be delayed because of prorogation: “Since Parliament will not sit again until March, it will not be possible for legislation to be tabled and receive royal assent in time for the expanded eligibility to take effect as early as April 2025. If legislation does pass later this spring, the rural supplement amounts for those now eligible as a result of the expansion will be queued to be issued when possible.”

Canada Pension Plan and Quebec Pension Plan enhancement. As of January 2024, a second additional contribution of 4% is required by the employee and employer on pensionable earnings between the year’s maximum pensionable earnings ($68,500 in 2024) and the year’s additional maximum pensionable earnings ($73,200 in 2024). This amount is reported in box 16A (CPP) or box 17A (QPP) of T4 slips. For self-employment income and other earnings, the rate for second additional contributions is 8%.

Quebec Pension Plan. As of Jan. 1, 2024, Quebecers aged 65 and over who are still working and already receiving QPP can choose to stop contributing to the plan, as workers in the rest of Canada already can under CPP.

In addition, the requirement to contribute to QPP for workers age 72 and older ends as of the year they turn 73. All wages paid and earnings received as of Jan. 1 of the year a worker turns 73 are no longer subject to QPP contributions.

Charitable donations. The deadline for making donations for the 2024 tax year was extended to Feb. 28, 2025, given the disruption of the Canada Post strike. The draft legislation confirms that the donation can be in cash or “transferred by way of cheque, credit card, money order or electronic payment.”

Home Buyers’ Plan (HBP) withdrawals. The HBP withdrawal limit increased to $60,000 from $35,000 for withdrawals made after April 16, 2024. Temporary repayment relief was also introduced to defer the start of the 15-year repayment period by an additional three years (up from two years previously) for participants making a first withdrawal between Jan. 1, 2022, and Dec. 31, 2025. Accordingly, the 15-year repayment period will start in the fifth year following the year that the first withdrawal was made.

Mineral exploration tax credit. Eligibility has been extended to flow-through share agreements entered into before April 2025 for expenses incurred (or deemed incurred) before 2026. See Line 41200.

Reporting rules for digital platform operators. Beginning with the 2024 calendar year, reporting platform operators must collect and report information on sellers using their platform to sell goods or provide certain services, such as the rental of real or immovable property.

If your client is a reportable seller, their reporting platform operator will provide them with an annual copy of the information collected and reported to the CRA under these rules. Sellers should expect to receive that information by Jan. 31, the CRA said.

Short-term rentals. If your client rents a residential property for short periods (less than 90 consecutive days), they must comply with provincial or municipal regulations and licensing, or else the CRA will deny them expense deductions. Transitional relief is in place for the 2024 tax year, so that if a taxpayer was compliant by Dec. 31, 2024, the taxpayer is deemed compliant for all of 2024.

Volunteer firefighters’ amount and search and rescue volunteers’ amount. These amounts increased to $6,000 from $3,000. Eligible individuals who performed at least 200 hours of combined eligible volunteer service during the year can claim one of these amounts.

Canada child benefit (CCB). Beginning in 2025, eligibility for the CCB will be extended for six months after a child’s death if the person claiming the CCB for that child is otherwise eligible. The person receiving the CCB will still be required to notify the CRA of the child’s death before the end of the month following the death. The extended period will also apply to the child disability benefit.

Stats from the 2024 tax-filing season

The CRA said in its release on Thursday that more than $52 billion in benefits was paid to taxpayers last tax-filing season.

The agency also issued more than 19 million refunds, with the average refund being $2,294.

Taxpayers who get back thousands of dollars in tax refunds can avoid that outcome by filing a T1213 Request to Reduce Tax Deductions at Source.

The form lists deductions and non-refundable tax credits, including RRSP contributions (not deducted from pay or by an employer), child care expenses, support payments, employment expenses, carrying charges and interest expenses on investment loans, large charitable donations and more.