Update: CRA tax services and COVID-19 support issues

In our work to help improve Canada’s tax system, we regularly discuss issues raised by our members with the Canada Revenue Agency (CRA). Learn about some recent or upcoming changes, and the feedback we’ve provided.

From general service and compliance concerns to issues with COVID-19 support programs, we have provided our input to the CRA on a number of matters raised by our members, both individually and through our tax committees. This blog presents a round-up of developments in the following areas:

General service and compliance issues:

  • introduction of multifactor authentication (MFA)
  • verifying electronic authorizations
  • new regulations on Disability Tax Credit (DTC) promoter fees
  • electronic notices of assessment

COVID-19 support programs

  • late-filed claims for wage and rent subsidies
  • Canada Emergency Rent Subsidy (CERS) — outstanding questions
  • employment expenses and benefits for remote workers

At the end of this blog, you will find links to information about other important developments on our tax news page, including highlights of key tax measures in the 2021 federal budget.

General service and compliance issues

Introduction of multifactor authentication (MFA)

The CRA recently implemented MFA so that individuals, businesses and their representatives can log in to My Account, My Business Account (MyBA) and Represent a Client (RAC) more safely. MFA adds an extra layer of security by allowing users to log in to a portal only after they’ve entered a one-time passcode sent to them by text or voice message to a cell or landline phone number.

Although MFA will greatly enhance the security of these portals, we cautioned the CRA against making it mandatory for representatives to enroll in MFA until after this year’s tax filing season.

While the CRA has postponed the requirement, representatives wanting to activate this feature now can do so by following the CRA’s online instructions.

We gave the CRA feedback on how it could streamline the MFA process for representatives and their firms. For example, to relieve representatives of the need to enter an access code every time they log in to RAC, we suggested that the CRA consider giving an option to receive a one-time code enabling access for an entire day. We also suggested authentication options beyond cell phone texts and calls to direct lines. In response to concerns raised on giving a personal cell number, the CRA confirmed that it would not use phone numbers provided for MFA for other tax administration purposes.

Verifying electronic authorizations

The CRA will only activate electronic authorization requests made by representatives for individuals and business clients after the representative has been verified. The CRA typically does this by calling the client.

However, many members have told us that the CRA has cancelled their authorization requests because their clients did not respond to the CRA’s verification phone calls. Reasons for this include:

  • the CRA did not leave a voice message on calls that were not answered
  • the client’s Caller ID indicated the call was from an “unknown number,” leading them to question the caller’s validity
  • the CRA seemed to make only a few contact attempts before cancelling the request
  • many authorization requests regarding large corporations were sent to C-suite executives, which is impractical

The CRA informed us that when phone attempts don’t succeed, it sometimes sends a follow-up letter. We asked the CRA to consider mailing out letters to taxpayers who do not answer the phone as a last resort in all situations. Although this will make the verification less timely, it will ensure authorization requests are not unnecessarily cancelled.

Representatives making these requests should advise their clients to expect a CRA call and provide guidance on how to tell when a call from the CRA is legitimate.

Finally, we suggested ways that the CRA could streamline the authorization process for large corporations, for example, by involving the corporation’s large case auditor in the process to find alternatives to contacting senior executives or directors.

New regulations on Disability Tax Credit (DTC) promoter fees

Newly published regulations coming into force on November 15, 2021 will limit the amount of fees that promoters can charge for preparing DTC claims to $100. We raised concerns with the $100 cap in response to the government’s consultation in 2020, but the regulations do not seem to address many of our concerns.

Now that the final regulations are approved, practitioners need more clarity on how the rules will apply and how they may affect practices who prepare these claims as part of a larger personal tax engagement. We will work with the CRA to understand how it plans to administer and enforce the fee cap.

Electronic notices of assessment (NOAs)

The 2021 federal budget proposes to amend the Income Tax Act to allow the CRA to send certain NOAs electronically even when the taxpayer has not authorized the CRA to do so. This proposal applies to individuals who file their income tax return electronically and those who engage a tax preparer to EFILE their return. (Taxpayers who file hard-copy returns will continue to receive paper NOAs.)

Members have raised some concerns about these proposals. For one thing, it is unclear whether the CRA would send an electronic NOA to a tax preparer directly. Tax preparers are engaged to prepare and file tax returns, but they do not necessarily have the resources to forward NOAs they may receive to their clients. We cautioned the CRA that NOAs should go directly to the taxpayer.

Further, as the CRA begins considering how it will implement these and other 2021 budget measures on electronic filing, correspondence, payments, and certification, we have asked the CRA to work with us and other key stakeholders to resolve any additional concerns that may arise.

COVID-19 support programs

Late-filed emergency wage and rent subsidy claims

We have had ongoing discussions with the Department of Finance Canada about giving the CRA more latitude to accept late-filed applications and amendments for claims for the Canada Emergency Wage Subsidy (CEWS) and the CERS.

While the legislation has not changed, the CRA updated its CEWS FAQ on April 21, 2021 to add new questions 26-01 and 26-02, which outline conditions that may allow the CRA to accept late-filed amended or original CEWS applications. The CRA’s CERS webpage is also updated to say late-filed CERS claims and amendments would be accepted under the same conditions.

CERS: Outstanding questions

We are currently awaiting answers from the CRA on a number of technical issues that members have raised about the CERS program. These questions include:

  • If a business pays a fee for the use of space inside a building (e.g., a coffee shop) and no lease was signed, is the amount paid eligible for the CERS?
  • Are there situations where hotel residency fees can qualify?
  • How would the CERS apply where the property is held in a holding company and both the operating and holding companies pay costs related to the property?
  • Are businesses eligible if they operate in remote areas and rent homes to house their employees?
  • Will a CERS registry be made public?

We also submitted a series of questions about the CERS and agricultural businesses.

Because the CRA’s Rulings Directorate is dealing with these issues, the responses to these questions will be released as technical interpretations.

One of the most common questions we’ve received is whether the CRA would develop an FAQ page for CERS issues like it did for the CEWS. However, we were told that the CRA has no plans to do this at this time.

Employment expenses and benefits for remote workers

Together with the Canadian Payroll Association, we are having ongoing discussions with the CRA about employer and employee issues resulting from COVID-19 containment measures. Issues we are working to help resolve include:

  • home office expense claims for 2021 and whether the simplified method allowed for 2020 returns will be extended to 2021
  • whether the CRA’s December 24, 2020 guidance on employer benefits and allowances will apply in 2021
  • temporary cashflow challenges that arise for employees and their payroll withholdings where their province of employment differs from their personal tax residence
  • permanent establishment risks in various provinces for businesses with remote workers whose activities meet the conditions in Regulation 400(2)

Looking ahead, it seems increasingly likely that more employees will continue to work remotely from home after the pandemic ends. We have encouraged the CRA to consider the impact of this changing landscape on their long-standing policies for employment expenses and benefits.

In case you missed it

Additional important tax issues and developments are summarized on our tax news and archive pages. These include:

  • Reporting COVID 19 benefit repayments on 2020 personal income tax returns (April 27, 2021) – information on how the CRA would like you to report COVID-19 benefit repayments on 2020 to 2023 personal income tax returns
  • CPA Canada Budget 2021 Tax Highlights (April 19, 2021) – a summary of this budget’s key tax measures
  • Issue with CERS calculator and lockdown support (April 14, 2021) – a summary of an issue with the CRA’s CERS calculator, particularly when a lockdown spans two qualifying periods

We often post information on our tax news page as we receive it, so be sure to check back regularly for the latest tax news from CPA Canada, and sign up for our tax blog for notifications on the latest blogs containing in-depth analysis and insights on tax issues.

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NOTE: The commentary function of this page has been temporarily closed. Unfortunately, because of the volume of feedback regarding recently announced COVID-19 tax measures, we do not have the capacity to respond to individual inquiries. We strongly encourage you to visit our Canadian Tax News and COVID-19 Updates page for information.

About the Author

Bruce Ball, FCPA, FCA, CFP

Vice-president, Taxation, CPA Canada