The Canadian government has announced its plan to accelerate the automatic tax return filing initiative, which has already provided benefits and assistance worth $3 billion to over one million Canadians in the most needed categories.

Details of the initiative:

• New legislation: As part of the Fall 2024 economic statement, legislation will be drafted to grant the Canada Revenue Agency (CRA) the authority to automatically file tax returns for some low-income Canadians to ensure they receive all their financial rights.

• Target groups: Approximately 20% of individuals with annual incomes below $20,000 do not file tax returns, denying them the assistance they deserve.

“SimpleFile” program:

• What is it? Launched for the first time in 2018 under the name “File My Return,” it was renamed and developed under the government's promise in the 2023 budget to create an automated system.

• How it works:

• The program allows invited users to answer some simple questions using their phone's keypad.

• After approval, the agency takes care of filing the tax return on behalf of the user.

• No need to fill out forms or perform calculations, and there is no requirement to talk to a customer service representative.

• The process takes about 10 minutes at most.

The goal of the initiative:

• Simplifying the tax return filing process, which has been described as complicated and unnecessarily costly, especially for low-income groups.

• Ensuring that Canadians receive the financial support and assistance they deserve, including tax exemptions.

Government statement:

The financial document stated: “Despite the initial success of the program, it is time to accelerate the modernization of the tax filing process in Canada and make it simpler and more effective.”

Program details:

In July, the “SimpleFile” program was expanded to include the use of digital software, either by the user or an authorized representative, in addition to traditional paper methods with the assistance of free tax clinics.

Who can use SimpleFile?

• The program targets the most vulnerable Canadians, especially those with simple tax cases or gaps in their tax return history or those who have never filed a return.

• Eligibility depends on income source and income level, which must be below a certain threshold, based on age, province, and disability status.

Expansion of the program:

• The first invitation was sent to 700,000 people initially, and it increased to 1.5 million in February.

• In the summer, an additional 500,000 were added with the introduction of digital and paper options.

• By 2025, the government aims to involve two million people in the program.

Program results:

• Response rate: 93% of those invited used the program, resulting in $3 billion being returned to low-income Canadians.

• Breakdown of refunds:

• $1.4 billion from the Canada Child Benefit payments.

• $500 million from Goods and Services Tax (GST) refunds, regional benefits, and carbon rebates.

Accelerating the automatic tax process:

• The government is working on new legislation that allows the Canada Revenue Agency (CRA) to use available information to automatically file returns on behalf of individuals.

• Beneficiaries will be notified in advance with a pre-filled tax form with the option to decline participation, but filing will proceed even if there is no response.

Example:

A single father with two young children living in Sault Ste. Marie, Ontario, earning $15,000 annually but has never filed a tax return, could receive up to $27,000 in assistance if he responds to the notice.

What about middle-class Canadians?

• The government aims to bring middle-class Canadians into the automatic system in the future.

• Targeted groups include those non-compliant with filing or those with gaps in their filing history and do not claim most deductions.

• The government also seeks to provide more free online tax programs and make amendments to the CRA laws to support efforts in simplifying and modernizing the tax system.