Changes to the tax return — pre- and post-COVID-19

News & Views

In late February, Canada Revenue Agency (CRA) announced several changes to the 2019 tax return. By early March, the COVID-19 pandemic was upon us and the world seemed to spin at warp speed. Among the changes for individuals was an extension to the tax return filing deadline — to June 1, 2020 — and for those individuals with tax balances owing, an extension of the payment deadline — to September 1, 2020 — without interest or penalties.

What were the original changes?

The original changes were cosmetic for the most part. The T1 general form is now eight pages instead of four. This doubling in size is a result of Schedule 1 being put in the return itself. With Schedule 1 gone, you no longer need its companion worksheet. Instead, there’s now a worksheet for the return.

The return features a new question on page 2, where you must confirm if you have income that’s exempt from tax under the Indian Act. A “yes” answer means you need to complete a new T90 form, Income Exempt under the Indian Act.

The biggest change is in the line numbers, from three or four digits to five digits — for example, Line 234 is now Line 23400. While the line numbers have changed, your requirements for reporting income, including investment income and its tax treatment, haven’t changed. Finally, the return includes more plain language, a larger font size, and more white space.

Paper returns — people still do that?

Yes, before COVID-19, roughly two million Canadians were expected to do so this tax season. However, in the current environment, CRA is encouraging more electronic submissions. While paper filers will welcome most of the design changes, CRA is expanding support for these individuals. This includes paper tax return booklets written in plain language, with notes about new benefits and a checklist. And CRA hired more staff to manage paper filers, including phone support and tax return error checking and correction.

Don’t let these changes trick you into thinking that CRA is abandoning technology. Started in March, Charlie, the CRA chatbot, is live and answering general tax filing questions. According to CRA, “the questions you ask will help it become more knowledgeable and interactive.” * Check it out and see for yourself.

Why file my return now?

You may be wondering why you should file your tax return now instead of taking advantage of the June 1, 2020 extension. There are two enticing reasons:

  • You’re expecting a refund.
  • You’re eligible for income-tested benefits, like the GST/HST credit or the Canada Child Benefit, and would like to avoid any possible future hiccups to those benefits.

The first could be a welcome source of cash, and so far, 75% of tax returns processed by CRA have resulted in refunds. The second can apply to you regardless of whether you’ll get a refund, have no tax owing, or have to pay an outstanding balance. If you are in the last camp, you can file your tax return now and pay your taxes owing separately, delaying this second step until September 1, 2020 without interest or penalties.

While the original changes to the 2019 tax return are small, they’re meant to make the returns simpler. Changes in response to COVID-19 have granted extensions for filing returns and paying tax balances owing. However, filing your return sooner rather than later can put your refund in your hands faster and reduce any hiccups with future income-tested payments. If you owe a balance, you can still file your return and pay your balance later.

Be well and stay safe.

These columns are current as of the time of writing, but are not updated for subsequent changes in legislation unless specifically noted.

*Canada Revenue Agency.What’s new for the 2020 tax-filing season. Ottawa: 2020.

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Tax, Retirement & Estate Planning Services Team

Tax, Retirement & Estate Planning Services Team

Manulife Investment Management

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