Just want to confirm that when I am applying capital loss from 2019 to 2018, do the software send the form T1A automatically during the efile process, or I need to print it to signed by the client and then mail it separately? if it will be transmitted by the efile, will I need to keep a signed copy for my record?
It does send it automatically for personal returns. It does not for corporate returns as far as I am aware. I have to mail those manually.
Loss carryback requests for T2 returns are transmitted with the efiled return in my experience.
Agreed - no need to do anything separately. Efile and wait for CRA to assess current, then prior year(s).
Best practices tip.
Recently I had an elderly retiree who asked me to reconcile all her refunds, tax installments, taxes withheld from source, payments on filing for the past five years.
She was confused and uncertain about what she paid to which CRA tax account - installment, payment on filing, balance due per CRA Review.
She was also confused and uncertain why there were multiple assessments for some tax years.
Unfortunately, the CRA T1 Statement of Account does not indicate the underlying source of transactions.
As a result, I have implemented the following new procedure for personal tax clients who are now experiencing current year capital losses which are applied to multiple prior-year gains.
I apply a variation of the procedure for clients who provide lead sheets for medical expenses but may be vulnerable to expense denial upon CRA Review or Audit due to incomplete medical expense documentation.
With clients who have on-going capital losses which are applied across multiple years I now do the following:
- Track the gross/net/inclusion rate of capital loss carryback amounts per the Source Tax Year.
- Track, reconcile, and maintain a continuity of the CNIL balances per the Affected Tax Year.
- Track, reconcile, and maintain a continuity of the CRA refunds per Affected Tax Year to indicate reason as Source Tax Year, CRA Review, CRA Program, T1Adj, T1A Loss CarryBack.
do we need to keep the signed copy of T1A in our file or no need for this?
We need to obtain a client signature and retain it for the prescribed period.
- ask for the signature,
- specify the tax years being adjusted, the capital losses being claimed in the current and in prior years,
- list the capital loss amounts applied from the eFiled tax year to tax years in which they were applied,
- advise clients to expect tax adjustments and refunds to the affected prior tax years, and
- a transaction list of the current tax year capital losses and how these losses affect the current tax year CNIL balances - opening balance, applied amounts, and closing balance.
Such a client letter would simplify, clarify, and deconstruct the often confusing and overwhelming process of the capital loss carryback which includes:
- T1A signature request
- explanation of the capital loss carryback process and the tax years affected, and
- verification of the ending CNIL balances for the filing tax year.
Such a letter would add to the client’s perception of value, competence, and proactive communication by their tax accountant.
In my opinion, in this world of fear, confusion, uncertainty, and accelerating change, the things that clients most want from tax accountants are:
Certainty - simplified and clear
I can’t find anything that says a T1A stemming from an electronically filed return needs a signature. The T183 attests to the info in the base return. The T1A is just a consequence.
Any reference for the sig requirement?
I have hunted for the requirement for the tax payer to sign and have not found any so I sign the T1Adj myself. I believe I read that either the preparer or payer must sign.
@obhorst: I think he was asking about a T1A, not a T1-ADJ.
@SmallBizGuy: I have, on occasion, filed a T1A on its own, without the accompanying T1. In such cases, I like to get the T1A signed by the client. If filed with the related T1, then I agree with you - the T183 is probably sufficient.
Ooops, that might teach me to read.