Don’t use outbreak to skip taxes, experts warn
CRA’s flexibility doesn’t mean ‘forgiving ... debt’
Along with everything else in the world, the COVID-19 pandemic has upended the rhythm of normal tax season, but experts say you’re still definitely going to need to pay the taxman sooner or later.
The Canada Revenue Agency has extended the filing deadline from April 30 to June 1, and if you owe money, they’re giving people until the end of August to pay up.
On the CRA website, there’s a COVID-19 page that goes even further, saying, “Collections activities on new debts will be suspended until further notice, and flexible payment arrangements will be available.”
In an emailed statement, the agency said it’s trying to get rid of “unneeded financial worries for Canadians, wherever possible” during the pandemic.
But don’t mistake the flexibility for a free pass to skip your taxes this year, according to Amin Mawani, an associate professor at the Schulich School of Management who focuses on tax policy.
“If you have to choose between paying rent and paying taxes, perhaps you should pay rent and not pay taxes now, and tax authorities are more likely to be understanding,” he said. “But eventually, nobody is talking about forgiving tax debt.”
And Mawani said it’s definitely a bad idea to try to use the pandemic to pull a fast one on the CRA.
“You can’t really cry a sob story that’s not true, to them. They know more about us than perhaps we might remember about our own selves,” he said. “You can’t say ‘I have three hungry mouths to feed’ when you don’t, because they know you don’t. You can’t say you have an elderly mother-in-law, because they know you don’t.”
Peter Bruno, president of H&R Block, said that the messaging from CRA sounds like an indication that they’ll make accommodations for any circumstances that make sense, but he also said that you’re not going to get away with skipping your taxes.
“It’s like they’re reaching out and saying listen, if there is a situation that you’re under, then let’s talk about it and let’s find a way to do the right thing,” Bruno said. “There’s flexibility here. There’s not a removal of obligation.”
However, Bruno said if you don’t need to wait, it’s probably a good idea to file your taxes soon because the government has made rapid changes to the system in the face of the pandemic, and there’s a good chance you’re going to get money back this year.
Bruno said H&R Block offices are still operating, with social distancing and improved cleaning, and the company is improving drop-off and digital signing capabilities for people who can’t come in person.
Some of the flexibility that CRA is offering will probably have consequences, though. Even though gaming the system is a bad idea, all the changes being enacted on the fly in response to the current crisis will mean some things fall through the cracks.
“They’re forcing themselves to be faster,” said Sean Mullin, an associate professor at the Ted Rogers School of Management at Toronto’s Ryerson University, focused on taxation policy. “And quite frankly, a lot of the checks and balances, and a lot of the criteria they would use to make sure that these types of credits aren’t being misused or are being administered under the regular compliance rules of a non-emergency setting, I think those things are just being put aside.”
Mullen said people should see the flexibility from CRA as a form of optionality — if you’re a first responder or an essential worker, you’ve got an extra month to file your taxes, and if your income has dried up, there’ll be some leeway — but eventually the system will get back to normal.
“I don’t think this will be the last of it,” he said. “I think they’re continuing to tweak these programs as we go forward.”
Financial Post