The federal government is moving forward with plans to make automatic tax filing more widely available to Canadians, including those who are “middle class.”
In the fall economic statement released on Monday, Ottawa announced several measures to make it easier for Canadian taxpayers to file their annual returns, building on efforts that are already underway.
“It is time for Canada to accelerate modernization of how Canadians file their taxes and make needlessly complicated and costly tax filing services a thing of the past,” the fall fiscal document states.
“Many countries have already pursued full-scale automatic tax filing and the federal government is launching the second phase of its work to move Canada towards broad-based automatic tax filing.”
Among the measures announced is legislation to allow the Canada Revenue Agency to automatically file a tax return on behalf of some lower-income Canadians, starting as early as the 2025 tax year.
As part of a national pilot program, first proposed in the 2023 federal budget, more than two million eligible Canadians had been invited by July to file their 2023 tax returns by phone, online or by mail using the agency’s SimpleFile services.
The pilot was launched to help low-income Canadians who have never filed a tax return or who have a gap in their filing history.
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The federal government is now looking into expanding automatic tax filing to “middle class Canadians with simple tax situations.”
“This could include, for example, non-filers or those with a gap in their filing history and who do not claim most deductions and credits,” the fall economic statement said. “It could also include a modest-income family who does not have the funds for a paid tax filing service.”
The fall fiscal update also included a proposal to amend the Canada Revenue Agency Act that would include simplifying and automating tax filing as among the responsibilities of the national revenue minister.
In addition, Ottawa is exploring options to make free online tax software more accessible to Canadians.
How does automatic tax filing work?
Three options for automatic tax filing were made available to Canadians eligible for the national pilot project this past summer: phone, digital and paper.
Using the SimpleFile service, tax returns can be filed in as little as 10 minutes, the CRA claims.
Eligible individuals using the phone or digital option were asked a series of simple questions and needed to confirm their personal information.
For tax filers phoning in and who created a personal identification number, any refund that they were eligible for would be available at the end of the call.
If no PIN is created, a notice of assessment will be sent either via mail or to the person’s CRA account after their return has been processed.
Among the low-income Canadians who were invited this year, 93 per cent filed their tax return, as of Nov. 3, and are receiving $3 billion in benefits and credit payments, according to the federal government.
The CRA also offers a secure digital service called “Auto-fill my return” that allows individuals and authorized representatives using a certified software to automatically fill in parts of their income tax and benefit return form.
The national pilot program is expected to continue next year and the CRA is planning to invite two million Canadians to file their taxes automatically for the 2025 season.
The government estimates that almost 20 per cent of Canadians with an income below $20,000 do not file a tax return.
The parliamentary budget officer (PBO) said in a report published in June that rolling out the automatic tax filing system would mean Canadians receive more than a billion dollars each year in currently unclaimed benefits from not filing their tax returns.
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