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Competitive Edge Blog

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Ottawa's new automatic tax filing promise

Ottawa's new automatic tax filing promise: what you should know and what I think about it.

A new automatic tax return system will be introduced next year as a measure to help Canadians with the cost of living. In this case, the CRA would pre-file a tax return with the data they have on file. An individual would then be invited to update their return or provide additional information.

This is an expansion of a service the Canada Revenue Agency set up in 2018 to allow Canadians with lower or fixed incomes to file simple returns over the phone. By 2025, two million Canadians will be eligible for that service, "File My Return," three times as many as now.

In general, Canadians do not have to file their taxes every year unless they owe money. In recent years, the federal government has increasingly relied on the Canada Revenue Agency for income-tested benefits. This includes the Canada Child Benefit, Childcare Subsidy, Canada Housing Benefit, and the GST tax credit to name a few.

As many people don't receive some of the benefits they are entitled to, this could have a significant impact on affordability, with thousands more dollars to be available to them. According to a 2020 report, 10-12% of Canadians do not file their taxes, mainly those in lower income brackets. Working-age non-filers let the government keep $1.7 billion in 2015.

Do you think this change would benefit you and your family members?

It is my belief that many people will lose out on valuable deductions such as child care, moving expenses, donations, medical tuition, student loan interest, and therefore losing out on some of the income tested benefits because their income will end up higher than under the current file yourself system. It would be most beneficial for seniors (1-2% of the population) and lower income employees who do not have deductions/credits available to them (10% of the population). Perhaps 15% of Canadians would be in the same situation or better off.

It's tough to trust the government that your automatic tax filing will accurately represent your year's tax situation. This is because in our Canadian tax system there are so many deductions, refundables, and non-refundables available to you.

Until next time,

Christine Walters

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