When and how to file this year’s tax return (March 2021)
Each year, the Canada Revenue Agency (CRA) publishes a statistical summary of the tax filing patterns of Canadians during the previous filing season. Those statistics for the 2020 filing season show that the vast majority of Canadian individual income tax returns — nearly 90%, or almost 28 million returns were filed online, using one or the other of the CRA’s web-based filing methods, or by telephone. The remaining 10% of returns were paper-filed.
Clearly, electronic filing is the overwhelming choice of Canadian taxpayers, and those who choose electronic filing this year have two choices — NETFILE and E-FILE. The first of those, NETFILE (used last year by just under 33% of tax filers), involves preparing one’s return using software approved by the CRA and filing that return on the Agency’s website, using the NETFILE service. The second method, E-FILE, involves having a third party file one’s return online. Almost always, the E-FILE service provider also prepares the return which they are filing. And, it seems that most Canadians want to have little to do with the preparation of their own returns, as last year 57% of all the individual income tax returns filed came in by E-FILE.
The majority of Canadians who would rather have someone else deal with the intricacies of the Canadian tax system on their behalf can find information about E-FILE on the CRA website at http://www.cra-arc.gc.ca/esrvc-srvce/tx/ndvdls/fl-nd/menu-eng.html. That site will also provide a listing (searchable by postal code) of authorized E-FILE service providers across Canada, and that listing can be found at https://apps.cra-arc.gc.ca/ebci/efes/epcs/prot/ntr.action.
Those who are able and willing to prepare their own tax returns and file online can use the CRA’s NETFILE service (which is available as of February 22, 2021), and information on that service can be found at http://www.cra-arc.gc.ca/esrvc-srvce/tx/ndvdls/netfile-impotnet/menu-eng.html. While there are some kinds of returns which cannot be NETFILED (for instance, a return for a non-resident of Canada, or for someone who declared bankruptcy in 2019 or 2020), the vast majority of Canadians who wish to do so will be able to NETFILE their return.
At one time, it was necessary to obtain and provide an access code in order to NETFILE. While such a code is no longer a requirement, the CRA has provided tax filers with a taxpayer-specific code which can be included with the return for 2020. That 8-digit alpha-numeric code is found (in very small type) in the top right-hand corner of the first page of the 2019 Notice of Assessment, just under the Date Issued line for that Notice of Assessment. Including the code with your return is not mandatory; however, the taxpayer will be able to use information from the 2020 return when confirming their identity with the CRA only if the code was provided on that return.
A return can be filed using NETFILE only where it is prepared using tax return preparation software which has been approved by the CRA. While such software can be found for sale just about everywhere at this time of year, approved software which can be used free of charge, or for a nominal charge, is also available. A listing of free and commercial software approved for use in preparing individual returns for 2020 can be found on the CRA website at https://www.canada.ca/en/revenue-agency/services/e-services/e-services-individuals/netfile-overview/certified-software-netfile-program.html.
Copies of the 2020 tax return and guide package can also be ordered online, at https://apps.cra-arc.gc.ca/ebci/cjcf/fpos-scfp/pub/rdr?searchKey=ncp%20, to be sent to the taxpayer by regular mail. Taxpayers can also download and print hard copy of the return and guide from the CRA website at https://www.canada.ca/en/revenue-agency/services/forms-publications/tax-packages-years/general-income-tax-benefit-package.html. In previous years, the CRA made some tax packages available in hard copy at Service Canada offices and post offices across the country. This year, however, there is no reference on the CRA website to such a distribution. Finally, the CRA will send, by regular mail, hard copy of the 2020 tax return and guide package to anyone who paper-filed a return for 2019 before November 30, 2020.
A minority of taxpayers will have the option of filing their returns using a touch-tone telephone. That option, called File my Return service will be available to eligible low-income Canadians whose returns are relatively simple and whose tax situation remains relatively unchanged from year to year. For such taxpayers, it is important to file, even if there is no income to report, so that they receive the benefits and credits to which they are entitled. The telephone filing option is, however, available only to taxpayers who are advised by the CRA of their eligibility for the File my Return service, and those individuals will have been notified by letter during the month of February.
Finally, taxpayers who are not comfortable preparing their own returns, but for whom the cost of engaging a third party to do so is a financial hardship, have another option. During tax filing season, there are a number of Community Volunteer Tax Preparation Clinics where taxpayers can have their returns prepared free of charge by volunteers. This year, most such clinics have had to change their usual in-person operation and adopt alternate methods. Volunteers can prepare an individual’s return, for free, by videoconference, by phone, or through document drop-off. A listing of the available clinics (which is updated regularly throughout the filing season) and their method of operation this tax season can be found on the CRA website at https://www.canada.ca/en/revenue-agency/campaigns/free-tax-help.html.
While there are a number of filing options available to Canadian taxpayers, there’s no element of choice when it comes to the filing and payment deadlines for 2020 tax returns. All individual Canadians must pay the balance of any taxes owed for 2020 on or before Friday April 30, 2021 — no exceptions and, absent very unusual circumstances, no extensions.
For the majority of Canadians, the tax return for 2020 must also be filed on or before Friday April 30, 2021. Self-employed taxpayers and their spouses have until Tuesday June 15, 2021 to file their returns for 2020 (but they too must pay any balance of 2020 taxes owing on or before Friday April 30, 2021).
The information presented is only of a general nature, may omit many details and special rules, is current only as of its published date, and accordingly cannot be regarded as legal or tax advice. Please contact our office for more information on this subject and how it pertains to your specific tax or financial situation.