PR Card Renewal: Tax Assessment

A little bit more black-on-white here:

Edited by ski - 26 Mar 2013 at 8:33pm

Make no mistake: anyone who is regularly employed in Canada almost certainly is obligated to file a tax return. CIC understands this. If and when CIC requests CRA Notices of Assessment and the PR (including PR applying for citizenship) fails to produce CRA Notices of Assessment for a year the PR reported to have been employed in Canada, CIC then has reason to be suspicious, and quite often will be, with predictable consequences.

I hestitate to further engage in a back-and-forth about the obligation to file a return for anyone who is employed. There is so little doubt about the virtual certainty that an individual who was regularly employed in Canada is obligated to file a Canadian tax return for that year it is a bit like going back and forth about a matter of general knowledge.

But, given the context in which the question arises, and given what I now perceive to explain some aspects of what has been reported about responding to RQ in the citizenship application process, I get the sense that there is indeed a more widespread misconception than I anticipated, so I will set out an explanation as clearly as I can.

To be clear, what I am talking about is the obligation to file a tax return by any individual regularly employed during the year. Almost everyone earning an income in Canada, at least any appreciable amount of income, is obligated to file a tax return. In particular, anyone on a payroll who is having tax withheld, almost certainly is obligated to file a tax return.

Do not be confused about what it means to "owe tax" -- it is not dependent on whether or not there is a balance due.     

ski wrote: You must file a Canadian tax return if you: --- owe tax; or --- want to receive a refund because you paid too much tax in the tax year.

Again, do not be confused about what it means to "owe tax."

Do not confuse a zero "balance owing" with whether or not there was tax payable, a tax owed.

In particular, even if the balance owing is zero, that does not mean the individual owes no tax for the year. A zero balance owing can mean, and usually will mean for anyone on a payroll having taxes withheld, that the full amount of the tax that is owed has been paid, typically paid by the amount withheld. Again, with emphasis, zero balance due does not mean there was no tax owed, but means that the tax owed has been paid.

Note: Anyone who has had taxes withheld is either entitled to a complete refund of ALL amounts withheld or they owed a tax. The government gets to keep the amount withheld because, bingo, the amount withheld pays the tax owed.


I will not attempt to second guess the conversation Spellbound had with the CRA. I do not know what question Spellbound posed to CRA. I do not know the context for it. I have no idea what years, if any, Spellbound was obligated to file a tax return.

I do know that almost everyone who has regular employment in Canada is obligated to file a tax return. I do know that if you fill in a tax return and on the T1 General there is a positive number for item number 435, "this is your total payable," that is the amount of tax owed for that year even if the amount entered on line 437, total withheld (from T4s), is equal to or greater than that the amount on line 435 -- the amount on line 435 is, again, the "tax owed" even if the balance due, after calculating the credits, is zero.

(If the balance due is zero, true, there is no effective penalty for failing to file, since, again, the penalty is calculated based on how much tax owed was not paid -- any percent of zero is zero -- but there is still an obligation to file a return.)


Bottom-line: It is true, there are many, many Canadians who are not obligated to file a tax return. Anyone with no income for example.

Anyone who is on a payroll in Canada, however, is almost certainly not one of those people. Anyone on a payroll in Canada is almost certainly obligated to file a tax return.

Anyone on a payroll in Canada who doubts this, who has not filed a return for any year in which they were employed and earning an income in Canada, should reconsider and file, or at least consult with a reputable, reliable accountant or tax adviser.

And don't ask the question this way: if I owe no taxes do I have to file a return?

Ask the question clearly stating that it is about someone who has been employed and earning an income in Canada.



Why bother reconsidering this?

How this relates to PR and citizenship
The question some may have is if there is no effective penalty, when the balance due is zero, why bother?

This is where PR renewal and citizenship processing come into play.

As I said previously, for purposes of the application for a renewed/replacement PR card, CIC asks for Notices of Tax assessment because those are direct, objective evidence of residency.

CIC does not enforce the tax laws however. So, alternative evidence can be and, in the absence of having the CRA documentation, should be submitted to prove residency.

The important take-away, however, is that CIC knows that anyone who reports being employed in Canada is (almost certainly) obligated to file a tax return. So, anyone who declares, in a RQ setting (PR card renewal or citizenship), employment in Canada, but who in turn fails to submit CRA tax documents, mostly the Notices of Assessment, for any year in which the individual reports being employed in Canada, raises suspicion.

Now, for PR renewal applicants, the impact of this can be diffused because a PR does not need to actually be a resident in Canada in order to be in Canada enough to comply with the PR residency obligation (given how liberal the PR residency obligation is). In other words, the particular facts of the individual PR's life may be such that the PR was abroad and/or was not earning income while in Canada, such that indeed, there was no obligation to file a tax return for this or that year. (Perhaps the situation for Spellbound.)

But, any PR reporting, in the work history section of the application, that they were employed regularly in Canada, but who does not produce CRA Notices of Assessment for the year that employment in Canada is declared, raises suspicion.

In other words, generally a PR applying for a renewed card who does not produce CRA Notices of Assessment is likely to raise questions, but may not run into significant suspicions or credibility issues if the circumstances are indeed consistent with no obligation to file tax returns, as corroborated by declared absences and the work history reported.

In contrast, the PR who reports being regularly employed in Canada but who does not produce CRA Notices of Assessment for the years in which the PR reports being regularly employed, not only raises questions, but raises suspicions.


Citizenship applicants:
For citizenship applicants there is little or no wiggle room in this regards.

If the applicant is not employed for any given year (whatever the reason: homemaker, student, disability), then, in that instance, not filing a tax return and thus not having a Notice of Assessment to submit in case of RQ, for that year, is not problematic.

But for any year in which the applicant reports regular employment in Canada (which, after all, is itself a big factor considered in assessing an applicant's residency), the applicant given RQ should submit the CRA Notice of Assessment in response to the RQ.

Pile the paystubs deep, deep, deep, and bank statements and credit card statements, and a whole lot of other paper, but fail to submit the CRA Notices of Assessment, the risk of CIC being suspicious is high.

Let's be clear about something: trust me, CIC understands that anyone regularly employed in Canada is obligated to file a tax return (even if the full amount is automatically withheld by the employer, even if there is a zero balance due), and thus they will have questions if there is a year in which the applicant declared employment in Canada but in responding to RQ does not produce the CRA Notices of Assessment for that year.

Make no mistake about this. Regularly employed in Canada means the individual is obligated to file a tax return (with very, very rare exceptions). Thus, declaring regular employment in Canada in the work history means the applicant should have a CRA Notice of Assessment for each year, for each year the applicant reports being regularly employed. And, if given RQ, the failure to produce the CRA Notices of Assessment for such years will trigger suspicion.

Yes, the applicant can produce alternative evidence of presence and residency.

Yes, the alternative documentation can be sufficient to overcome the absence of documentation like the CRA Notices of Assessment.

But will it be? And, especially for those applying for citizenship and given pre-test RQ and hoping their case is returned to a file review track, will it be enough to satisfy CIC? . . . or will it be the factor that tips the applicant's case into a "credibility concern" residency case destined to go all the way to the Citizenship Judge for an in-person hearing?

I am going to copy this into the Citizenship Forum, with some additional observations about why I gave this so much attention.

I did not mean to argue. I meant to explain.

The short of it is illuminated by a statement in a recent CBC story where it was emphasized that "CRA wants the paperwork."

You do not need to rely on me. You should not rely on me.

But, anyone who has been on a payroll in Canada for a year in which they have not filed a return, I strongly suggest they file a return or at least see a well-qualified professional about this.

And as I said, make no mistake: for those given RQ, CIC expects to see the CRA Notice of Assessment for years in which the applicant reports being employed in Canada. And a failure to submit the CRA NoA will raise suspicion.

As I said, I have no idea what question Spellbound actually asked. And I do not know what Spellbound's actual circumstances are.

No need to argue! :-) There is no requirement to file tax returns as such. However, the vast majority of people, even on payroll, still do it. The reason for that is the claim for refund - there is almost 100% guarantee that the Government owes you money. You have to file your tax return in order to claim the refund. However, you have THREE years to do so. So I filed my 2008 taxes in April 2012 in order not to loose my money. This worked well, I got the refund, and not a word from the CRA that I was late, not a single problem. I will file at least my 2009 taxes within a month, but hopefully later years as well.
I understand that CIC wants to see the Assessments, but it is just not available.  I have explained the reasons. The paystubs, records of employment and T4 forms actually contain much more information confirming residence, employment and income. Tax assessment does not provide any information regarding how long the person was actually present in the country or how long the person worked. The only information it provides is your income and taxes - that's all.
They cannot expect every single document they desire. Those who want to commit fraud will simply make any document on computer.