Ottawa Moves to Expand CRA Authority for Automatic Filing of Low-Income Tax Returns
The Carney government intends to propose legislative amendments that would give the Canada Revenue Agency the authority to file tax returns for some low-income Canadians even without their express consent.
Described in the federal budget, the measure is part of a continuing effort by Ottawa to ensure that vulnerable individuals don’t miss out on government benefits they’re entitled to because they failed to file their taxes. But it is separate from a previously announced plan to provide prefilled tax returns for millions of eligible taxpayers.
The key difference is that, for a much smaller number of vulnerable Canadians, the CRA would also be able to deem a prefilled return accepted if the individual doesn’t review it or opt out of automatic filing within 90 days of the tax filing deadline.
“If the eligible individual does not confirm the information (with or without changes) by the end of the 90 days, the CRA could file a tax return on the individual’s behalf,” Luca Bonifacio-Proietto, press secretary for Wayne Long, the secretary of state for the CRA, said via e-mail.
The change would apply starting with the 2025 tax return – meaning that the rollout would start with the coming 2026 tax season – pending approval of required amendments to the Income Tax Act, according to the budget.
The CRA could decide to file a tax return without explicit consent only for individuals with income below either the federal basic personal amount ($16,129 for the 2025 tax year) or the provincial equivalent.
The measure would also only apply to Canadians whose income comes entirely from sources for which the CRA already has tax slips. And the tax agency would only consider filing a return on behalf of someone who hasn’t filed a return in at least one of the preceding three tax years.
Separately, the government is also proposing to supply prefilled tax returns for up to 5.5 million Canadians with relatively low incomes and simple situations. But that larger group of taxpayers would be required to review and confirm their tax information before it is submitted, according to Mr. Bonifacio-Proietto.
The government is aiming to make prefilled returns available to one million Canadians starting in the 2027 tax filing season, growing to 5.5 million by the 2029 tax season.
The CRA will hold consultations and publish more details on these measures in the coming months, Mr. Bonifacio-Proietto said.
Both initiatives are intended to help low-income Canadians receive benefits such as the Canada Child Benefit and the GST/HST tax credit, which are only available to those who have filed a tax return.
A widely cited study published in 2020 estimated that up to 12 per cent of Canadians don’t file tax returns. The research found most of them are low-income people who have little or no tax owing, but are missing out on benefits and income support for which they would otherwise qualify.
Anti-poverty advocates have long called on the government to adopt some form of simplified or automatic tax filing to make it easier for those at the bottom of the income spectrum to receive that financial aid.
But in many cases, even with prefilled returns, Canadians will have to actively provide additional information to claim all the benefits and tax breaks they’re entitled to, said Jennifer Robson, a professor of political management at Carleton University and lead author of the study on non-filers.
Tax credits for anything from medical expenses to charitable donations require people to provide information the CRA doesn’t have on record. The same holds for provincial benefits such as Ontario’s Trillium Benefit, which requires taxpayers to declare how much they pay for rent, Prof. Robson said.
In general, the complexity of Canada’s income tax system limits the extent to which tax filing can be automated, said Alexandre Laurin, vice-president and director of research at the C.D. Howe Institute.
Britain, for example, significantly simplified its own tax system before transitioning to one in which most employees and pensioners are not required to file a return, he said.
In Canada, automatic tax filing has attracted criticism from some who are skeptical of the need to enable the federal tax agency to fill and file returns.
The CRA “has no business acting as both the tax filer and the tax collector,” the Canadian Taxpayers Federation, a group that advocates for lower taxes and government spending, said in an online petition against auto tax filing.
The Globe and Mail asked Mr. Long’s office whether Canadians could incur penalties if a return filed by the CRA on their behalf turned out to have incorrect or incomplete information. Mr. Bonifacio-Proietto said that because the only people eligible to have the tax agency file a return for them would owe no tax, no penalties would apply.
If it later emerges that a taxpayer did not qualify to have a tax return filed on their behalf, the return will be considered to not have been filed, according to the budget.
This article was first reported by The Globe and Mail
