From: 1revenuecanada@canada.com   
      
   The CRA has our tax data — so why are we still filling out these crummy   
   forms? :CRA SOTW   
      
   Jamie Golombek | April 20, 2017 4:04 PM ET   
       
   Results from a new study commissioned by tax preparation behemoth H&R Block   
   show that as of earlier this week, two out of five Canadians still need to   
   file their 2016 tax returns. The poll also indicates that while one in four   
   Canadians actually gets    
   excited about filing and the prospect of receiving a hefty refund, most people   
   associate negative feelings with the filing process, citing reasons ranging   
   from finding tax preparation a complicated process (21 per cent) to the   
   inconvenience factor (19    
   per cent) of filing a tax return or just the feeling of overall anxiety it   
   evokes (11 per cent).   
      
   But have you ever wondered why we even need to file a tax return in the first   
   place?   
      
   I pondered this question more closely last week as I sat with my brother in a   
   Tel Aviv restaurant, where he explained to me, nonchalantly, that in Israel,   
   most residents don’t bother to file personal tax returns. That’s because   
   most Israelis are    
   actually exempt from filing, based on the type(s) and/or amount(s) of income   
   they earn. Similar systems exist in other major countries, including Japan,   
   the U.K. and the Netherlands.   
      
   Each tax season, Canadian taxpayers or their tax preparers, spend millions of   
   hours filling out forms, albeit mostly electronically, to file their tax   
   returns. And it’s not easy stuff for the untrained filer. For example,   
   let’s say you want to claim    
   the $2,000 pension income amount, which translates into a non-refundable   
   federal credit worth 15 per cent or $300. You just need to follow the Canada   
   Revenue Agency’s federal worksheet, which says, “Enter on line 314 of   
   Schedule 1 $2,000 or the    
   amount on line A, whichever is less. However, if you and your spouse or   
   common-law partner are electing to split your eligible pension income, enter   
   the amount from line A on line A of Form T1032, Joint Election to Split   
   Pension Income. Follow the    
   instructions at Step 4 of Form T1032 to calculate the pension income amount to   
   enter on line 314 of your and your spouse’s or common-law partner’s   
   Schedule 1.” All that work for three hundred bucks?   
      
   Which begs the question: can’t the CRA do all this math for you? In other   
   words, if you have qualifying pension income, couldn’t the CRA automatically   
   calculate both your eligibility for, as well as the correct amount of, the   
   pension income credit?   
      
   Indeed, the CRA already has electronic records of nearly all your income,   
   including pension income which is reported on a T4A slip, a copy of which is   
   electronically transmitted to the CRA. Similarly, employment income is   
   reported on T4 slips, which your    
   employer files electronically. RRSP and RRIF withdrawals are reported on T4RSP   
   and T4RIF slips and investment income is reported on T3 and T5 slips.   
      
   A step in the direction of what’s become known in global tax parlance as   
   “pre-populated returns” came in 2016 when the CRA introduced the   
   “Auto-fill” feature. This allows taxpayers who have fully registered for   
   the CRA’s My Account feature    
   and who use a NETFILE-certified software product to use the “Auto-fill my   
   return” service, which will download all your information on the most   
   popular tax slips, avoiding transcription errors. Slips available online for   
   2016 include: T3, T4, T4A,    
   T4A(OAS), T4A(P), T4E, T4RIF, T4RSP, T5, T5007, T5008, RC62, RC210, RRSP   
   contribution receipts as well as other tax-related information such as your   
   RRSP contribution limit, any Home Buyers’ Plan or Lifelong Learning Plan   
   repayment amounts, non-capital    
   losses carried forward, and federal and provincial tuition, education, and   
   textbook carryover amounts.   
      
   One of the hurdles to automatic, pre-populated returns and tax calculations in   
   Canada is the proliferation of the dozens of boutique tax credits inherent in   
   our personal tax system which must be independently claimed on your return,   
   assuming you meet    
   various qualifying conditions. There are credits for volunteer firefighters,   
   search and rescue volunteers as well as first-time home buyers. Last year’s   
   budget saw the elimination of four of them (the children’s fitness and arts   
   credits as well as    
   the education and textbook credits for students) and in this year’s Budget,   
   the popular transit credit was killed as of July 1, 2017. Last year, the   
   government announced a study of these credits, also known as tax expenditures,   
   which is still underway,    
   “(to make) sure they are all consistent with our approach to tax fairness.”   
      
   Yet even if the government did away with many of these credits, individuals   
   who make charitable donations would still have to report them on their return   
   to claim the donation credit as charities do not currently submit electronic   
   copies of their issued    
   donation receipts to the CRA. The same holds true for medical expenses, for   
   which you must keep your receipts if you want to claim the medical expense tax   
   credit.   
      
   And some individuals, such as those who report rental or self-employment   
   income, would always have to complete a return to take into account various   
   associated deductible expenses. But for the average Canadian who just has   
   employment or investment income,   
    a pre-populated return, with calculations done for you, could be a big help.   
      
   In 2008, Revenu Quebec experimented with the use of prefilled tax returns. The   
   program was set to be rolled out in four stages beginning with 100,000   
   taxpayers who received prefilled tax forms in 2008, and expanding to virtually   
   all Quebec tax filers in    
   2011.   
      
   Of the initial 100,000 Quebec taxpayers selected to receive a prefilled tax   
   return in 2008, 80 per cent were more than 65 years old and of those who   
   received a prefilled return, only 33 per cent used it. After the 2008 test   
   run, Revenu Quebec abandoned    
   plans to expand the program.   
      
   In reviewing the Quebec experiment, a 2011 Fraser Institute study concluded   
   that the use of prefilled personal income tax forms “does little to reduce   
   the costs of personal income tax compliance.”   
      
      
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