The CRA updated its guidance to indicate that filing relief for impacted taxpayers extends to 'any forms and elections that are normally included with the T1 and T3 [trust] returns.'Justin Tang/The Canadian Press
The Canada Revenue Agency will extend filing relief this tax season to forms and elections included with individual tax returns for those reporting a capital disposition. However, the agency hasn’t specified which forms and elections will receive that relief, leaving taxpayers uncertain about whether they can rely on the filing extension.
Individual taxpayers reporting a capital disposition in 2024 have until June 2 to file their 2024 tax returns without incurring interest or late-filing penalties. The deadline for filing an individual T1 return is April 30.
The relief was offered in parallel with the CRA’s announcement it would revert to administering the current capital gains tax rules rather than the proposed capital gains tax changes announced by the Liberal government in last year’s federal budget.
Last week, the CRA updated its guidance to indicate that its filing relief extends to “any forms and elections that are normally included with the T1 and T3 [trust] returns.”
The extension appears to give taxpayers with capital dispositions an extra month to file forms and elections that must be filed with their 2024 T1 return without incurring late-filing penalties or risking other consequences.
However, tax advisors say the guidance isn’t clear about which forms and elections count as “normally included.”
The CRA has been “very vague” in its language related to the filing extensions, says Jason Heath, managing partner at Objective Financial Partners Inc. in Markham, Ont.
What’s included
The CRA indicated specifically in its updated guidance that the T1135 Foreign Income Verification Statement would receive the extension.
A taxpayer must file a T1135 if they owned foreign property with a cost of more than $100,000 at any time in the year.
“That one’s important because it’s a relatively big penalty,” Mr. Heath says.
The CRA charges a failure-to-file penalty that’s the greater of $100 or $25 for every day the T1135 is late, to a maximum of $2,500.
Ryan Minor, director of tax for CPA Canada in Sudbury, Ont., says it makes sense the CRA would extend filing relief to T1135s, specifically. Taxpayers must disclose gross income earned and capital gains or losses realized on dispositions of foreign property on their T1135 – items that taxpayers calculate when they prepare their T1 returns.
The CRA is also extending filing relief to forms filed with trust returns, specifically the schedule 15 (beneficial ownership) and schedule 130 (deductibility of interest and financing expenses).
The CRA gave trusts with capital dispositions until May 1 to file a T3 return and issue slips without interest or penalties. (The filing deadline for T3 returns and slips is March 31.)
What about other forms?
Mr. Minor says the CRA’s guidance leaves it unclear as to whether the relief extends to all forms and elections. For example, some forms are included with a filed tax return while others are filed separately from the return, even if they must be filed by the same deadline.
The CRA’s guidance on relief for elections is also uncertain, Mr. Minor says, as the agency didn’t provide additional information.
For example, Mr. Minor says he suspects the CRA’s filing relief will apply to a section 45(2) election for a change in use of a principal residence to a rental to defer realizing capital gains. But he doesn’t think relief will apply to a section 85(1) election for a tax-deferred rollover of property to a corporation, which requires a joint election.
The CRA didn’t respond by press time about which forms and elections are eligible for filing relief.
Alexandra Spinner, partner with Crowe Soberman LLP in Toronto, says she expects “impacted” taxpayers who are reporting a capital disposition will be able to rely on the CRA’s filing relief.
But because she doesn’t expect a “crystal-clear answer” about which forms and elections qualify for the extension before April 30, she thinks the safer path is to file by the normal deadline.
“My advice is: if you can, file on time,” she says. “If you realize afterward that you missed a slip, you can generally – and very easily – amend your return online.”
The CRA previously indicated that its filing relief for 2024 T1 returns doesn’t extend to individuals who aren’t reporting a 2024 capital disposition, meaning there may be situations in which one spouse is eligible for the tax return filing relief while the other isn’t.