Experts suggest extending tax filing deadline

If you had difficulty getting through tax season this year, more so than usual, you’re not alone. And some experts say extending the filing deadline could be the answer.

Evelyn Jacks, author and president of the Knowledge Bureau, says given the proliferation of trust structures in the investment universe, the federal government should consider extending the tax filing deadline for all taxpayers to June 15.

Extending the deadline until June would give individual taxpayers the same time considerations afforded unincorporated small business owners. The deadline was first extended for business owners following federal budget changes introduced in 1995. The Canada Revenue Agency says business owners were given the new filing date to help in preparing financial statements and income returns. Although business owners filing by June 15 avoid late filing penalties, taxes are still payable to the CRA by April 30.

In talking to tax preparation specialists, Jacks says more and more taxpayers and their advisors are having a difficult time complying with the current deadline. Many need to wait for several weeks for T-3 slips to be delivered and sometimes those slips are incorrect, making the task of meeting the April 30 deadline for individual taxpayers particularly challenging.

Although she admits that extending the deadline and drawing out tax season for half the year could be costly for practitioners, she says compliance would be less hurried, more accurate and more time could then be spent counselling clients on tax planning issues.

“Advisors have mixed feelings about this. An elongated tax season is not necessarily more efficient for them. We are hearing a couple of schools of thought on that,” she concedes. Overall though, Jacks says her proposal has met with a lot of support from within the industry. “Times have changed and there are new investment products and these rules now affect many more people. Everyone is in agreement that pushing a tax filing deadline for a majority of taxpayers into a month or two weeks is just not working.”

Jamie Golombek, vice president, taxation and estate planning at AIM Trimark investments agrees Jacks is on the right track. “I personally have not seen it suggested in Canada yet, but I think it’s a good idea,” adds Jamie Golombek, vice-president, taxation and estate planning at AIM Trimark Investments. “My hunch is it would be welcomed by the tax community and it would spread the work out over a longer period of time and therefore reduce the need for excess staffing and staffing shortages that happen in the month of April. It would also allow people to make sure that they get all of their stuff in on time, all of their receipts, instead of filing early and then having to amend.”

Along with considering the June 15th deadline, Golombek suggests the CRA also look at implementing an American-style system, where taxpayers can put off their April 15 deadline by asking for an extension of four to six months.

“When an individual goes to meet with their tax accountant, it’s a quick meeting because there’s such a rush and volume of stuff that needs to get out by April 30. I think [it would help] if you had an extra four months, like the United States, where you could meet anytime between April and August,” he says. “You would still need to do an estimate, but that estimate would probably be pretty accurate, and then you could wait to formalize that tax return until later on and get into a longer discussion with the client about tax planning opportunities.”

Other groups in the industry are also working to address the issue. Last September, a group from the Investment Funds Institute of Canada, the Investment Dealers Association, the Canadian Life and Health Insurance Association, the Canadian Bankers Association, and the Canadian Association of Income Funds drafted a joint letter to the Department of Finance, recommending changes that would require public income funds, with certain exceptions, to post their information within 60 days of their year end dates, in order to give brokerage and IDA channel firms time to prepare their own T-3 slips for investors.

“Many fund companies try to get those slips out by January. We get all the information from the underlying companies and income trusts, consolidate it and issue those slips,” says Golombek. Although the CRA requires mutual fund trusts to issue slips 90 days after their year end — December 15th for many companies, “From a customer service point of view, obviously, it’s in our best interest to get those slips out as early as possible. We try to get them out sometime in January. I think that’s true of most major mutual fund companies.”

The issue with income trusts and fund-of-fund structures is their need to issue financial statements for the year and classify their income distributions before they can even begin to issue tax statements. “If the underlying information is not posted until March 15, it’s hard for [brokerages] to turn it around fast enough and get it out a week or two later. If we can require the income trust people to have their information available by February 28th, many of them do that already, the thought is brokerage firms would then be able to take that information and get their slips out a week or two later — in March and not into April.”

Filed by Kate McCaffery, Advisor.ca, kate.mccaffery@advisor.rogers.com