Taxpayers who aren't reporting a capital gain or loss must file their tax return by April 30.Sean Kilpatrick/The Canadian Press
A possible mismatch in tax filing deadlines because of the administration of capital gains and losses this tax season may complicate returns for some couples.
The Canada Revenue Agency (CRA) is giving individual taxpayers reporting a capital disposition in 2024 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.
The CRA provided the relief to give taxpayers reporting a capital gain or loss for 2024 more time to gather slips and prepare their tax returns.
However, the extension could make things complicated for couples when one spouse has a 2024 capital disposition to report and the other doesn’t. A spouse who isn’t reporting a capital gain or loss must still file their tax return by April 30 to avoid interest and penalties, even if their spouse (or common-law partner) is eligible for the CRA’s one-month extension.
While couples in Canada can’t file jointly as they can under the U.S. tax system, they typically file together to take advantage of tax planning opportunities available to couples, such as the pooling of eligible expenses for the medical expense tax credit or the splitting of pension income.
Ryan Minor, director of tax for CPA Canada in Sudbury, Ont., says tax preparation software makes calculations using both spouses’ returns to optimize tax savings. “That’s why it’s generally expedient to do [the returns] together.”
Couples with different filing deadlines would still be able to pool expenses and split pension income, for example, but “if the information is not complete, you may file, and it may not be optimal,” Mr. Minor says.
The CRA also gave financial firms extra time to issue tax slips this tax season. For example, mutual fund trusts and exchange-traded funds reporting a 2024 capital disposition were given until May 1 to issue T3 tax slips without incurring late-filing penalties. The deadline for filing slips is March 31.
In response to a question from The Globe and Mail about whether the 2024 T1 filing relief would be extended to a spouse not reporting a 2024 capital gain or loss, CRA spokesperson Charles Drouin said, “Individuals without a capital disposition reported on Schedule 3 [the form for reporting capital gains and losses] will not qualify for the relief from late-filing penalties and interest. The relief that has been announced does not extend to other taxpayers.”
Mr. Drouin added that “unique situations can be considered on a case-by-case basis if relief is warranted.”
Mr. Minor says taxpayers reporting 2024 capital dispositions, including couples with mismatched effective filing deadlines, should try to file by the April 30 deadline anyway.
As the CRA has not yet published comprehensive guidance regarding the extent of the filing relief, taxpayers might not want to rely on it, he says.
For example, the CRA has not indicated whether it would extend the relief to the filing of a T1135: Foreign Income Verification Statement, Mr. Minor says, which taxpayers must file with their tax return if they have foreign property with a cost of $100,000 or more.
He says he hoped the CRA would reconsider its position and extend the filing relief to spouses of taxpayers reporting a 2024 capital disposition.
He points out that couples in which one spouse is self-employed have the same tax-filing deadline, which is June 16 this year.
“That seems to acknowledge it takes extra time [for couples] to optimize and calculate the tax return, and you do it together,” Mr. Minor says.
Self-employed individuals must still pay any taxes owing by April 30, despite not having to file their return until June 16. They would also have until June 2 to pay 2024 taxes owing without interest if they were reporting a 2024 capital disposition, Mr. Minor says.
Late T3 slips and the filing extension
The Globe asked the CRA how a taxpayer could be sure they had a 2024 capital disposition – and thus were eligible for the interest and late-filing penalty relief – if issuers have until May 1, one day after the April 30 tax return filing deadline, to issue T3 slips.
Mr. Drouin says, “If the taxpayer has not received their slips by early April, or if they have questions about an amount, they must contact the issuer of the slip. If they know that they will not be able to get a missing information slip by the due date, taxpayers must use their final pay stub or statement to estimate their income and deductions, credits, and expenses that they can claim. They must include the estimated amounts on the appropriate lines of their return.”
If an adjustment is needed later, taxpayers can correct their return without submitting a new one by using reFILE or Change my Return."
Mr. Minor says the CRA is essentially telling taxpayers to file by April 30, estimate capital gains “and fix later, if need be.”