Canadians face chaotic tax season due to rule changes

Canadians are facing a confusing tax season due to unexpected changes in tax rules and delays in tax forms. The Canada Revenue Agency (CRA) is allowing some taxpayers and issuers of tax slips to submit their paperwork later than usual without facing penalties. One major issue arises from the Trudeau government's recent announcement to reverse a planned increase to the capital gains tax. Tax professionals are worried that this change, along with unfinished updates to CRA systems, will create challenges for those filing taxes. Some taxpayers have been advised to wait a few weeks before submitting their returns, especially if they need to report capital gains from 2024. The government had announced an increase in the capital gains tax inclusion rate in its 2024 budget, but this proposal was not passed before Parliament was prorogued. As a result, the CRA will now revert to the previous rate but is still updating its systems and software for this change. Consequently, the deadlines for some tax slips have been extended. For example, T5 slips, which report investment income, must now be sent by March 17, whereas T3 slips can be mailed as late as May 1. Taxpayers reporting capital gains now have until June 2 to file their taxes without penalties. However, there are questions about how this relief applies to those who may receive their T3 slips late, which could complicate joint filings for couples. Accountants have noted concerns about the potential backlog of last-minute filings as the deadline approaches. Other tax changes enacted include an option for Canadians to claim certain charitable donations made before March 2025 against their 2024 income. Also, renters are no longer responsible for unpaid taxes owed by their foreign landlords due to new legislation. Moreover, CRA's recent updates to tax slip verification have led to further delays in receiving forms. This has prompted the CRA to allow extended deadlines for filing slips as errors were identified in the new system. Accountants are concerned that this cluster of delays could lead to more tax filings in May, which was not anticipated, potentially overwhelming their capacity to assist clients during this busy time.