TAX ALERT  |  April 23, 2021

The pandemic continues to impact our daily lives as we are in the midst of the third wave – and personal tax season. The IRS extended U.S. personal tax deadlines from April 15 to May 17 and Revenu Quebec followed suit, extending the deadline for Quebec personal tax returns from April 30 to May 31.

As the April 30, 2021 personal tax return filing deadline approaches, it appears there will be no official extension or blanket relief announced from the Canada Revenue Agency (CRA) for filing or payment. On the contrary, the CRA has stated that extensions would risk key benefits for some Canadians and that the CRA would address taxpayer relief requests on a case-by-case basis. 

The benefits that CRA refers to are likely income based benefits such as the refundable Canada Workers Benefit, the monthly paid Canada Child Benefit, and quarterly GST credits that are only received by taxpayers in specific income brackets, and are only reinstated each year by filing a tax return each year to confirm those income levels. In 2020, CRA extended the tax filing and payment deadline from April to September and confirmed that taxpayers would continue to receive payments at previous eligibility levels. Arguably, Canadians who rely on many of the aforementioned benefits may also rely on volunteer tax clinics to file their tax returns. Many groups including Community Volunteer Income Tax Program that generally operate in libraries, donated space or in low income seniors homes – have been cancelled or severely restricted in their ability to operate in many cities due to the pandemic health restrictions, for the second year in a row. The reality of this is that many of these individuals, often new Canadians and low-income seniors, may not otherwise have access to a computer or have language barriers, which makes it difficult for them to complete their taxes in any other format – and they rely on these benefits to pay for essential expenses.  

Some may think – well wait, we did this all before in 2020, why do you need an extension this year? The answer lies in the fact that not much has changed from last year. Most taxpayers still receive at least a portion of their tax documents as physical paper in the mail, and do not have access to scanners and other equipment at home in order to convert those pieces of paper to an electronic document. This means clients need to leave their home, some of who are under a provincial stay at home order or curfews, to get those documents to their accountants’ office. This presents challenges.

Further challenges occur after tax preparers receive documents from their clients, specifically getting those documents on the cloud for their colleagues, who are also locked-down in their own homes, to process. This, coupled with clients delivering documents later in the season, likely assuming there would be an extension similar to last year, is creating concern that some tax returns will not be filed on time. 

So what options are there if a return will not be filed on time?

• Attempt to estimate taxes owing based on rough information and pay that amount. If you pay by April 30, or you are in a refund position, there is no penalty for filing late. Tax professionals in tough positions may also need to prioritize clients who are likely to owe money over those with refunds.
• Attempt to estimate outstanding amounts to the best of your knowledge and file the tax return with those amounts. You may need to amend later, and if additional tax is owed as a result of under-estimated income, interest may apply but you will avoid late filing penalties.
• If first two options are not feasible, taxpayers could request penalty and interest relief from the CRA after filing the return late. 

Generally, the CRA will only provide taxpayer relief in situations where the reasons for filing were outside the taxpayer’s control (refer to Information Circular 07-1R1, at paragraphs 23 to 36, for factors the CRA considers when evaluating whether to waive or cancel penalties and interest). 

The CRA has indicated it will consider relief on a case-by-case basis, so taxpayers should not expect wide-scale relief due to a curfew or a stay-at-home order Taxpayers and their accountants should do everything in their power to file on time where possible.