The federal government is making strides toward simplifying tax filing for Canadians by expanding automatic tax filing initiatives. As outlined in the 2024 Fall Economic Statement, the Canada Revenue Agency (CRA) is working to modernize the tax system and reduce the need for costly, complex tax filing services.
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Success of Pilot Programs Paves the Way for Expansion
The government highlighted the “initial success” of its pilot programs and announced plans to accelerate the implementation of automatic tax filing. Many countries already use automatic tax filing systems, and Canada aims to follow suit with a broad-based approach.
Legislation to Support Lower-Income Canadians
To help lower-income Canadians, the CRA plans to introduce legislation that will enable automatic tax returns using available data. Eligible individuals will receive pre-filled tax returns and can choose to modify the information or opt out of the automatic process.
“If eligible Canadians do not opt out, the tax return would be filed on their behalf by the CRA, thereby helping more Canadians receive their benefits,” the statement noted. This measure could be implemented as early as the 2025 tax year.
SimpleFile Program for Lower-Income Canadians
Since 2023, the CRA has invited eligible Canadians to participate in the SimpleFile by Phone program. This initiative targets lower-income individuals who either do not file taxes or have gaps in their filing history. In 2024, the CRA expanded the program, increasing the number of invites from 700,000 to over 1.5 million. By November 3, 2024, 93% of invitees had filed a tax return, unlocking $3 billion in benefits and credit payments.
During a 2023 pilot, over 118,000 lower-income and non-taxable individuals were invited to use the system, resulting in 35,000 tax returns filed and $92 million in benefit payments. These included:
- Over $32 million in Canada Child Benefits
- $400,000 in Advanced Canada Workers’ Benefit
- $217,000 in Dental Benefits
- Over $58 million in Goods and Services Tax Credits, Canada Carbon Rebates, and other provincial/territorial benefits
Expanding to Middle-Class Canadians
The government is exploring ways to extend automatic tax filing to middle-class Canadians. This could include individuals with simple tax situations who do not claim most deductions or credits. The aim is to simplify the process for modest-income families who might otherwise rely on paid tax filing services.
Enhancing Free Online Tax Software
To make tax filing even more accessible, the government is considering improving the availability of free online tax software. Additionally, it proposes amending the Canada Revenue Agency Act to include simplifying and automating tax filing as part of the national revenue minister’s responsibilities.
Advisory Group and Public Consultations
The CRA has established an advisory group to guide the implementation of automatic tax filing and will consult with Canadians to ensure the system meets their needs. These efforts aim to help Canadians claim benefits they are entitled to but may have missed due to not filing taxes.
Potential Economic Impact
A report from the Parliamentary Budget Officer (PBO) estimated that an automatic tax filing system could help Canadians claim $1.7 billion in unclaimed benefits in 2024-2025 and up to $1.9 billion in 2028-2029, totaling approximately $9 billion over five years.
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A Simpler Tax Future for Canadians
By advancing automatic tax filing, the federal government hopes to create a more accessible, equitable tax system. The initiative aims to reduce barriers, ensure Canadians receive their benefits, and modernize the overall tax filing process. With ongoing pilot programs and legislative support, the CRA is on track to make this vision a reality as soon as 2025.
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