Receipts are clogging up your mailbox -- T3s, T4s, T5s, medical, donation, child care -- not to mention monthly transit-pass receipts, account statements and confirmation slips. Clearly, tax season has arrived.
Imagine if you could simply throw it all into an envelope with a blank tax return and leave all the grunt work to the tax man, who is probably best equipped to fill in the increasingly complex tax forms.
Dorothy Villanueva tried this and found herself in Tax Court a few months ago. She was fighting an assessed penalty of nearly $3,000 for repeated failure to report income on her tax returns.
The Canada Revenue Agency claimed she failed to report about $28,000 of employment income on her 2001 return. The penalty is equal to 10% of the income not reported.
On April 30, 2002, Ms. Villanueva filed her 2001 tax return, which was completely blank other than her personal information and signature. She atttached a copy of her T4 slip.
Ms. Villanueva's husband testified that while he knew his wife had income from other sources, he didn't complete the tax return because he didn't have time to calculate the other income and wanted to avoid any late-filing penalty by sending in the blank return by the filing deadline.
The judge found that "the filing of the T4 slip with the return amounted to reporting the income ... as required under the Act." So, the penalty for non-reporting Ms. Villanueva's employment income was reversed.
At first glance, this case may seem encouraging, even as it suggests caution is necessary before adapting this strategy.
First of all, the case was heard under the "informal procedure" of the Tax Court and, although influential, is not legally precedential.
Secondly, the case dealt specifically with a penalty assessed by the CRA for failure to report income. If you simply stuff all your receipts in an envelope, the CRA could take a different approach and assess the general penalty for non-filing of a tax return "in prescribed form that contains prescribed information."
The CRA's Caitlin Workman says the agency follows certain guidelines to determine whether an incomplete return will be accepted or your information sent back to you for re-filing.
Ms. Workman also suggests that if taxpayers need help with their returns, they may be eligible for assistance under CRA's Community Volunteer Income Tax Program.