2024 PERSONAL INCOME TAX RETURN FILING OBLIGATIONS
Sadly, they did it again. For the third time in nearly as many years, Canada’s Minister of Finance and the Federal Liberal Party has found themselves unable or unwilling to implement their own proposed tax changes. This time, the Government has failed to implement the changes to the capital gains inclusion rate, proposed in the April 2024 Federal Budget.
Fortunately, the Minister of Finance (“the Minister”) addressed the above about-face earlier than previous deadline day policy reversals. The Minister, partly in acknowledging the confusion and turmoil caused by its lack of financial governance, has provided Taxpayers with relief from potential filing delays caused by CRA’s understandable inability to update its internal systems and tax reporting slips. Further details with respect to the Minister’s communication regarding relief from interest and penalties can be found in detail in the Canada Revenue Agency “What you need to know for 2025 tax filing season”
SUMMARY OF CHANGES
The CRA will grant relief in respect of late-filing penalties and interest for those returns that include capital gains. The new deadline will be June 2, 2025, for Individual filers (T1s) and May 1, 2025 for Trust filers (T3s). On the surface, the relief is intended to provide additional time for taxpayers reporting capital gains.
WHAT ARE THE PRACTICAL IMPLICATIONS OF THE ABOVE
We suggest that our clients (NTD NO DASH) ought to reach out to their investment managers and request their T3, T3 summaries, gain/loss trading summaries, and of course the related investment management fees (because we all like a tax deduction).
As a reminder, the CRA considers the onus and responsibility for the completeness of taxpayer reported information to rest with the TAXPAYER not the CRA, not the investment manager, and not the Tax Preparer.
SHOULD I CHANGE HOW I PREPARE AND TRANSMIT MY INCOME TAX PACKAGE
Generally, we are advising taxpayers to proceed with personal tax season as they always have. Thus, please compile and transmit your tax packages to us as you have in the past. However, we are specifically advising Taxpayers to take the extra step of specifically contacting their investment managers so as to make every effort possible in ensuring any missing T3s and or gain/loss trading summaries are identified as early and as completely as possible. Failure to do so, may result in the assessment of potential interest and penalties when CRA employs their T1 matching program in the early fall.
SHOULD I TAKE ADVANTAGE OF THE EXTENDED FILING DEADLINE
It is too early to determine how much of a reporting disruption will be caused by the filing extension. However, it is important to put the current situation in context. Nearly 5 years ago, April 2020, with the world embroiled in COVID related chaos, approximately 85% of the personal Income Tax returns prepared by our office were complete and or filed by the traditional deadline of April 30th. It is difficult to compare the extreme environment that existed in April 2020 with the soon-to-be-forgotten tempest-in-a-teapot that is the current situation. Thus, we remain cautiously optimistic that nearly all 2024 T1s will be able to be filed by the traditional April 30th filing deadline, assuming our clients follow the bolded recommendations in this communication. It should be noted, there will be rare exceptions. Those rare exceptions will be individually addressed on a case-by-case basis by the partner at FK responsible for your T1.