My name is Mark Goodfield. Welcome to The Blunt Bean Counter ™, a blog that shares my thoughts on income taxes, finance and the psychology of money. I am a Chartered Professional Accountant and a partner with a National Accounting Firm in Toronto. This blog is meant for everyone, but in particular for high net worth individuals and owners of private corporations. The views and opinions expressed in this blog are written solely in my personal capacity and cannot be attributed to the accounting firm with which I am affiliated. My posts are blunt, opinionated and even have a twist of humor/sarcasm. You've been warned.

Tuesday, February 22, 2011

Personal Income Tax Filing Delays-Late and Amended T-slips

As an accountant on the personal income tax firing line, I have seen an enormous shift in the timing of when personal income tax returns are filed in Canada. In the "good old days", the timing of the filing of income tax returns was determined by personality type. People who were early birds and wanted to file their returns to get their refunds as soon as possible or to fulfil their compliance requirement came in early. Many others provided their returns between the second week of March and the first two weeks of April and finally, individuals with the personality type that are Christmas shopping on the 24th, brought their returns to us in mid to late April. In the past, this was great for accountants as these groups split the returns down the middle or were 60/40 such that the workload was spread out over March and April. Clients got better service since accountants and their staffs were not overwhelmed and there was time to properly review the returns and provide planning advice.

However, over the last ten to fifteen years, as Canadians have become more sophisticated and started purchasing mutual funds, flow-through investments and certain other investments, the filing landscape has changed drastically. Since T3 forms for mutual funds and the T5013 forms for limited partnerships do not generally have to be issued until the end of March, many clients, even the early birds, cannot file their returns early. This problem is exacerbated as the penalty for missing the filing deadlines are relatively minor and not a deterrent to the filing corporations, trusts or partnerships. Also there are no penalties for filing amended T3s, T5013s etc. The CRA appears to condone the multiple amending of returns and forms by these trusts and partnerships which are often amended in the last week or two of April.

Whether you engage an accountant or not, this issue still affects you. You may have all your slips ready to file March 1st, but you must wait for that one final slip possibly until the end of March or even later, delaying your refund. If you are waiting for one slip or even two and the quantum is not large, you may consider filing early and then filing a T1 Adjustment when you receive the slips, but most people do not want the hassle of doing such.

In addition, many T3 trust returns, for family trusts often have a March 31st filing due date (the return is due within 90 days of the taxation year often December 31st). Since the deadline for most T3 and T5013 forms is also March 31st and many of these slips have not yet been received, the filing of these returns can be problematic. Thus, accountants are forced to file returns using the information on hand at March 31st and then amend the returns when the tax slips are eventually received.

With clients often waiting for several tax slips, the filing ratio in my practice has changed such that now approximately 1/3 of returns are filed in March and 2/3 are filed in April. From an accountant’s perspective, the last two weeks of April are insane and not conducive to preparing tax returns. In addition, we end up filing many T1 Adjustment forms for the late or amended slips and the CRA wastes resources administering all these amendments. It is interesting to note that the CRA is aware of this issue and actually addressed it in the 2007 Federal Budget saying; it would review and streamline the T3 slip process, but nothing seems to have changed.

In my opinion, the CRA should consider one of the following changes:

  1. A February 15th deadline for T5s and a March 15th deadline for T3s and T5013s etc.
  2. February 28th deadline for trusts and partnerships that don’t have significant investment income (say 5% or less). Any investment income would be accrued where it was less then 5% of the total revenue.
  3. A March 15th deadline for T3s & T5013s where the units are held by investors (ie: income trusts, flow through partnerships, mutual funds etc.) and a March 31st deadline for family trusts.
  4. Or probably, most practically, significant penalties to deter the late filing of forms or penalties where amended forms and returns are done on a consistent basis.
The blogs posted on The Blunt Bean Counter provide information of a general nature. These posts should not be considered specific advice; as each reader's personal financial situation is unique and fact specific. Please contact a professional advisor prior to implementing or acting upon any of the information contained in one of the blogs.

2 comments:

  1. Why can't we just have a Feb 28th deadline for everything? Keep it simple...

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  2. Hi Kevin:

    I also had that thought, but as an accountant I did not think that through and should have known better.

    The problem is where a parnership or mutual fund has investments,they often need to accuulate information from the T5's which don't arrive in many cases until the end of Feb.and thus, they must wait for that info before preparing the T3s & T5013s, its sort of a vicious circle.

    ReplyDelete