August 9, 2024

Summary: Have you prepared a newcomer’s income tax and benefit return recently?  When filing the return, you may have told the client this action will automatically trigger the disbursement of benefits to which they are entitled.  But you may be surprised to learn that this is not always correct.

Even though you will provide their world income for the year in which they arrive in Canada, the Canada Revenue Agency (CRA) will inform the client that they need to provide this information again.  More to the point, what the CRA really wants is the income information for the first and possibly the second year prior to the client’s arrival in Canada.  There is a CRA form, the RC151, specifically designed for this purpose but the CRA does not tell the client this.

As a simple first step toward resolving this problem, the CRA should also inform the client to submit a completed RC151.  In the longer term, the CRA should tell commercial providers of return preparation software like UFile to incorporate into their products the questions currently contained in the RC151.  This would eliminate the need for the RC151 form.

Have you prepared a newcomer’s income tax and benefit return recently?  When filing the return, you may have told the client this action will automatically trigger the disbursement of benefits to which they are entitled.  But you may be surprised to learn that this is not always correct.

In the area where we live and volunteer, we have noticed a higher percentage than in previous years of clients who are newcomers to Canada.  For these newcomers, this may be the first time they are filing an income tax and benefit return.  As part of this process, they need to indicate in their return that they immigrated to Canada during the tax year.  Within the UFile software this opens a new page which the volunteer must fill out.  This page asks for information on the date they arrived in Canada and the income they earned during the tax year before they entered Canada.  Within the return, this produces a page entitled “World Income (Federal)” which gets submitted to the Canada Revenue Agency (CRA) as part of the return.

Unfortunately, this information is not enough for the CRA to start paying some of the benefits linked to the return, like the GST Credit.

When newcomers receive their first benefit notice (often, within our area, for the Canada Carbon Rebate), the notice states that the CRA cannot calculate the client’s benefit as the client needs to provide their world income from all sources for the tax year.  As a result, the CRA will not provide any of the benefits it manages and which the client is entitled to receive until it receives this information.

There are three puzzles here:

AThis happens despite the volunteer having indicated in the software and subsequent return their client’s world income from all sources for the year in which they arrived in Canada.

BIn its correspondence with the client, the CRA states that it does not have this information, but it does not tell the client what they need to do to provide this missing information.

However, there is a form, called the RC151, specifically designed for this purpose.

CThe RC151 form asks for largely the same information as is contained within the return.  The only difference is that the form also asks for income information for the first and possibly the second year prior to the client’s arrival in Canada.  (For a couple, it also asks for the date their union was established.)

There are two simple and inexpensive solutions the CRA could implement to deal with this problem:

1In the short term, the CRA could include one more phrase in its letter to the client directing the client to submit the RC151 form with the additional information the CRA requires to trigger the calculation and disbursement of benefits.

2In the longer term, the CRA could ask commercial providers of return preparation software like UFile to incorporate into their products the questions currently contained in the RC151 concerning the client’s income for the first and possibly second year prior to their arrival in Canada.  This would eliminate the need for the RC151 form.

What perplexes us is why the CRA hasn’t already implemented the first solution?  We only noticed the problem this year.  But the problem has no doubt existed for some time.  The resolution of this problem is now overdue.  By implementing such a simple change, the CRA could show its commitment to provide a more client-oriented service.  This would contribute to making newcomers’ first experience with the CRA constructive rather than confusing or frustrating.