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What's the point of Auto-Fill for T's Slips???
June 26, 2024
7:50 am
Alexandre
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AltaRed said

The bigger problem is the complexity of the Income Tax Act with all of its targeted benefits and exceptions designed by politicians to cater to, or target, certain groups, and that the tax system is based on individuals rather than families such as filing jointly (as in the USA). I suspect a mere fraction of tax returns could be automatically generated and populated with the right data. Populating the return with tax slip data is only the beginning of tax return preparation for the majority of tax returns.

IRS estimates up to 40% of all tax returns can be automatically generated. That is a lot.
You do have a point about benefits and exceptions: when I use TurboTax it forces me to go through pages and pages of questions related to benefits and exceptions. CRA knows nothing about them unless I enter that info.

From the other hand, any taxpayer income is reported to CRA, and whatever income is not reported taxpayer won't be inclined to report it voluntarily.

Based on that reality, if I were to design an auto-fill system for CRA, I'll do it the following way: each taxpayer return is autogenerated, based on income and known to CRA deductions (married, over 65 years old, etc.).

That return and its end result is provided to taxpayer. If taxpayer is OK with autogenerated return, it stays as is, if not - for example, there are medical expenses to submit, taxpayer files their return which overwrites automatically generated by CRA.

June 26, 2024
9:16 am
AltaRed
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There is a lot more to taxpayer adjustments, at least in Canadian T1 tax returns that vary a lot from the US tax law.

There is attribution of income on various, especially JTWROS, T3 and T5 tax slips, rental income, capital gains/losses on T5008 tax slips, adjusted cost base calculations to properly determine capital gains/losses, sales of other capital assets such as investment real estate, actual taking of RRSP deductions (versus contributions), self-employed income, etc. Those are only the major items.

I would be surprised if even close to 25% of Canadian income tax returns could be filed without taxpayer adjustments. Without a major overhaul of the ITA that won't won't happen in my lifetime, automated tax returns are a fantasy.

June 26, 2024
12:57 pm
Alexandre
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I think you are overestimating number of people with complex tax situations. For example, on the topic of capital gains/losses: Canadian government says for 2024 tax year 28.5 million Canadians are not expected to have any capital gains income.

I wonder what percentage of middle class and of low-income Canadian taxpayers are concerned with rental income, sales of assets triggering capital gains/losses, etc., etc.

June 26, 2024
1:18 pm
AltaRed
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I don't recall using the term 'complex' nor did I target any particular class of taxpayers such as low income. Those are your words.

Suffice to say, I would still assert that automatically generated tax returns by CRA based solely on tax slip data would be rife with errors for the majority of taxpayers....for a variety of reasons I already articulated.

June 26, 2024
1:31 pm
Bill
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What I don't understand is why we can't just pull up our blank return in My Account on the CRA site and just fill it out online, no matter how complex, why don't they have that set up so we don't have to use the various 3rd party free and pay tax programs that then need to be uploaded to CRA site?

June 26, 2024
2:12 pm
Alexandre
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Government falling short on promise to roll out automatic tax filing pilot, experts say

A number of countries, including the United Kingdom, Germany and New Zealand, have some form of automatic filing system for low- and fixed-income earners.

Moody, a Calgary accountant and former chair of the Canada Tax Foundation, said he thinks Canada should move toward the U.K. model. Under that model, those with simple tax situations have their returns filed automatically but can correct any inaccuracies later.

Jennifer Robson, an associate professor in political management at Carleton University, estimates that roughly a third of all Canadians have tax situations that are simple enough to permit the CRA to automatically file their returns.

June 26, 2024
2:16 pm
pwm
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I agree Bill. I've said the same thing for years. CRA spends a lot of time and money to certify all the various 3rd party software packages. They could just use that money to develop their own software which we could download from the CRA website or fill in online.

Also, I agree with AltaRed regarding auto tax filing. Unless they completely re-write the tax code to drastically simplify the rules there could never be more than a tiny minority of tax filers for whom auto-filing would be feasible, and that will never happen.

June 27, 2024
10:38 pm
Norman1
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pwm said
I agree Bill. I've said the same thing for years. CRA spends a lot of time and money to certify all the various 3rd party software packages. They could just use that money to develop their own software which we could download from the CRA website or fill in online.

CRA can't develop the software for what they spend doing the NETFILE certifications. The certificiation does not mean that the entire return is accurate or optimal. That's a myth.

Years ago, someone found that the returns from different NETFILE-certified software are not the same. The person contacted CRA and found that the certification ensures that all the income totals (like Total Income and Net Income) are exact. But, the certification does not require that all the deductions are claimed, all the credits are claimed, or all optimizations are done:

2. CRA does NOT test whether deductions and tax credits are claimed, nor whether taxes could be reduced by allowable transfers, such as tuition costs from student to parent or spouse, pension income between spouses or other optimizations. It is not CRA's job to lower anyone's income tax. Thus, the fact that a number of programs neglected to claim foreign or provincial tax credits, causing the big differences in my tax owing, is not a concern to CRA.

June 29, 2024
7:24 am
savemoresaveoften
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Norman1 said

pwm said
I agree Bill. I've said the same thing for years. CRA spends a lot of time and money to certify all the various 3rd party software packages. They could just use that money to develop their own software which we could download from the CRA website or fill in online.

CRA can't develop the software for what they spend doing the NETFILE certifications. The certificiation does not mean that the entire return is accurate or optimal. That's a myth.

Years ago, someone found that the returns from different NETFILE-certified software are not the same. The person contacted CRA and found that the certification ensures that all the income totals (like Total Income and Net Income) are exact. But, the certification does not require that all the deductions are claimed, all the credits are claimed, or all optimizations are done:

2. CRA does NOT test whether deductions and tax credits are claimed, nor whether taxes could be reduced by allowable transfers, such as tuition costs from student to parent or spouse, pension income between spouses or other optimizations. It is not CRA's job to lower anyone's income tax. Thus, the fact that a number of programs neglected to claim foreign or provincial tax credits, causing the big differences in my tax owing, is not a concern to CRA.

  

Why should they ? Same as auto file return so people who are lazy to file still get their govt handouts. Make no sense in my mind.

June 29, 2024
12:50 pm
everhopeful
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There are many low income folk who don't have the same access to technology and internet that we do, and the financial knowledge to file themselves. I would rather have auto-filing get the credits that are targeted to them, rather than them have a corporate tax filing service do the work for them while taking an exorbitant amount of their refund in fees.

June 29, 2024
3:55 pm
AltaRed
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everhopeful said
There are many low income folk who don't have the same access to technology and internet that we do, and the financial knowledge to file themselves. I would rather have auto-filing get the credits that are targeted to them, rather than them have a corporate tax filing service do the work for them while taking an exorbitant amount of their refund in fees.  

That is more or less the initiative CRA plans to get going as reported early in this thread. To catch those folk who do not now file.

June 30, 2024
7:15 am
AltaRed
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To add a bit more context, for 2024 (2023 tax year), there were about 5.8M nil T1 tax returns https://www.canada.ca/en/revenue-agency/corporate/about-canada-revenue-agency-cra/individual-income-tax-return-statistics.html

That does not necessarily mean these were only simple returns, but returns that had no taxable income. That does not count those who do not file and thus miss out on benefits (hundreds of thousands per CBC article depending on how one interprets the article).

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