The filing experience

Context

The tax filing experience is a visible source of interaction with the Government of Canada for individuals, businesses and trusts. It typically includes provincial and territorial taxes, as the CRA administers these for all provinces and territories except Quebec, which has its own tax administration – Revenu Québec; and Alberta, which administers its own corporation tax. While the majority of the revenue the CRA collects is from income tax, the CRA does administer several other taxes - including sales taxes, fuel charges, and excise tax - each with their own filing and reporting requirements.

Canada's tax system is based on the principle of self-assessment. This means that individuals generally complete an income tax and benefit return each year to report their annual income, claim all deductions or credits that apply to their situation, and calculate whether they owe tax or are eligible to receive a refund. The CRA then validates this information and strives to issue taxpayers' notices of assessment within two weeks of receiving the digital individual tax returns and within eight weeks of receiving the paper individual tax returns. Although the majority of tax returns are assessed within service standards, there is a small percentage that fall outside of the standards, as additional processing time is required to complete the assessment.

The CRA handles tax and benefit filings from a wide variety of clients such as individual income tax and benefit returns, corporation income tax returns, sales tax (GST/HST) returns, and specialty business returns among many others. With individual personal tax and benefit returns (T1) and corporation income tax returns (T2) being the most significant, this briefing focuses on the T1 and T2 filing experience. Over 90% of individual income tax returns and 94% of corporation income tax returns are filed electronically, a figure that is increasing each year. Providing a fast and easy filing experience, regardless of the filing method, is essential to support compliance within Canada's self-assessment system.

Since March 2020, the CRA supported Canadians and businesses facing hardship as a result of the COVID-19 pandemic by extending the filing and payment deadlines in 2020. In 2021, deadlines for filings and payments reverted to normal to ensure there would be no negative impact or delay in delivering benefits and credits to Canadians. For the 2020 tax year, interest relief was provided to individuals who received COVID-19 emergency relief measures and whose taxable income was less than $75,000.

Considerations

Filing methods and platforms

In 2021, over 29.5 million individual income tax and benefit returns and over 2.4 million corporation income tax returns were filed, and over 328,000 trust returns were assessed (in fiscal year 2020-2021). A large majority of these returns were filed electronically with the exception of trust returns, which remain largely filed on paper.

Filing methods and platforms

-	Individual income tax returns (T1)	Corporation income tax returns (T2)	Trust returns (T3)	GST/HST returns	Other levies/partnership information returns
Filing method: electronic	27 million	2.4 million	53,000	6.9 million	96,800
Filing method: paper	2.5 million	148,000	275,000	386,000	55,000

The CRA is focused on innovation in tax filing and refining business processes to deliver services to Canadians efficiently and effectively. The CRA works closely with software developers to make sure Canadians have access to high quality tax preparation software products, some of which are free for taxpayers. The CRA is also working to improve the filling experience through My Business Account and has recently enabled clients to view more of their tax information electronically through the platform.

Under Canada's self-assessment tax system, taxpayers or tax intermediaries must perform calculations to determine taxes owing, with some exceptions for eligible individuals for whom the CRA performs the calculations. The CRA is also experimenting with simplified calculation options, such as the online work-from-home credit calculator introduced for the 2020 tax year in response to the increase in persons working from home during the pandemic. When the CRA verifies a tax return, additional documentation may be required to ensure the correct information is on file. Taxpayers are able to send supporting documents electronically via a secure online portal to validate information provided on their tax returns or in their benefit claims.

Making tax filing easier

The CRA continually introduces new services and improvements to filing processes. Recent improvements include:

• Allowing tax representatives to update client information and provide estate documents electronically
• Adding additional information such as the COVID-19 support payments to the Auto-fill my return service, and increasing the number of tax years that can be imported from four to five to automatically populate parts of an income tax and benefit return in certified tax software
• Partnering with financial institutions to allow clients to share their direct deposit information with the CRA, which allows real-time updates of their banking information and quicker access to their tax and benefit returns

While continuing to promote digital services, other filing methods such as paper filing will continue to be supported so that no one is left behind. Those who filed paper in the previous year now receive the following year's income tax package by mail, ensuring they have what they need to file.

Support for vulnerable population segments

Vulnerable segments of the population can face barriers in filing their taxes and receiving the benefits and credits to which they are entitled. The CRA assists members of these groups through various programs and services including:

• File my Return, which allows individuals with low or fixed incomes to auto-file their income tax and benefit returns by answering a series of short questions through an automated phone service
• Northern Service Centres that offer outreach services in the territories
• An Outreach Toolkit that helps raise awareness of benefits and credits within Indigenous communities and provides various types of supports to them

Next Steps

The tax filing season for individuals' 2021 income tax and benefit return will start in February 2022.