Hi forum members,
I have an individual client who along with his wife and a minor child became Canadian PR in 2018. Somewhere in the middle of 2019, they all went back to his home country India for few months to take care of his old parents. While going back, he informed CRA that he is going till further notice and requested stopping of his Child Care Benefits and GST refunds etc. Parents’ health did not go well, he decided to prolong his stay in India. He took a permanent full time job there and now came back to Canada in Sep 2021. For the entire calendar year of 2020, all three of them were out of Canada. They did not have any property or any sort of income here in Canada during this time except 14000 dollars in his RRSP and 4000 in his chequing account.
Now, after coming here, they applied for CCB for Sep 2021 onwards period, since they are a resident now. CRA responded saying that they would need Canadian Income tax returns to be filed for both husband and wife for the year 2020.
As per my understanding, I should be filing a straight non resident tax returns with 0 net Canadian Income and also file Schedule A so that there World Income can be reported as well. T1135 Foreign Income Verification Statement will also be filed.
- Can some experts please confirm if I am on the right path? If not, what would you suggest?
- Tax cycle software is telling that I need to paper file this tax return because of EFILE exclusion? Is this how it should be?
Thanks for taking time to read and answer my query.
Is your client really non-resident? I think that’s the first question to be answered, not from here, but from your client after you give him all the references to the Act. And I think intent was the key, even though facts, might suggested.
From information you provided, it was never his intent to become non-resident, the fact that they were outside of Canada, for long period of time, isn’t going to be conclusive that he is non-resident, if that’s the case.
I don’t think you can file his return until that question is answered.
@taxadvisorcanada
“As per my understanding, I should be filing a straight non resident tax returns with 0 net Canadian Income and also file Schedule A so that there World Income can be reported as well. T1135 Foreign Income Verification Statement will also be filed”
Ummm no… no basis for that at this time and limited information…
Tax filing software will not help you with this one.
The determinations will have to be made on Facts and the Income Tax Act.
However, based on your post so far, it can be said that this taxpayer (And his wife) are DEFINITELY both “non-filers”.
Based on your post so far, they have both definitely failed to report one or more Canadian tax returns.
Where is their 2019 Canadian Tax return? What did they swear to/certify/attest to when they filed it?
Ignoring tax filing responsibilities is never a good thing…
Agree with both @jeffliu and @joe.justjoe1 here. The info is too limited, but even based on the limited fact pattern provided, I’d be inclined to think they could be ruled continuing residents. The lack of intent to emigrate and the maintenance of accounts here tend to argue for that. Now, there well may be alternative arguments to be made, but those haven’t been presented here.
If they are determined to be continuing residents, then you’d need to file returns declaring their worldwide income, taking a credit for foreign tax paid against same. May end up being a wash, may not.
Here is a starting reference for this topic:
https://www.canada.ca/en/revenue-agency/services/tax/international-non-residents/individuals-leaving-entering-canada-non-residents/factual-residents-temporarily-outside-canada.html
I would also look at:
- RC66SCH - Status in Canada and Income Information for the Canada Child Benefits Application
- CTB9 - Income of Non-Resident Spouse or Common-Law Partner for the Canada child benefit
The former should probably have been filed as it may have prevented this situation, unless there is something else happening here. (Which is a near certainty as the request from the CRA suggests that your client failed to file their Emigration Returns, assuming that they were factually non-residents to Canada. As others have mentioned is in question.)
Then there is the issue of what will happen with their immigration status. But I am not a specialist in immigration law.
Hello,
RC66SCH is to show all the past 3 years’ world incomes.
IN ADDITION:- CRA BENEFIT SECTION will usually require a letter/declaration from the couple to confirm the date of re-entry (return residents)
and the past 3 years’ world incomes. Preferably upload/submit doc thru MY ACCOUNT or REPRESENTATIVE or fax to
CRA
CCB/GST CREDIT
WINNIPEG TAX CTR
P O BOX 14000 STN MAIN
WINNIPEG MB
R3C 3M2
FAX# 1 204 984 2099
Still have questions, pls call CRA:-
Meh…
The OP has not yet obtained copies of the India tax returns and assessments.
These folks had $14k in rrsp, indicating income of $80k plus (on the info provided) , then failed to file, declare income, or pay tax for over 2 years, and have produced nothing to indicate anything other than they should have been filing as canada tax resident throughout (ie world wide income)…
And on income of $80k plus, why GST credits?
So IMHO this file is worthy of many hours of invesigating their documentation to determine the (provable) facts…
I would start at this page, and then have the client complete form NR-74 or NR-73 and request a determination. CRA will review the form, review the India-Canada Tax Treaty, and all other facts and respond. Then based on that, you will know whether or not to file a CDN return for 2020.
Residency-status-determination - Canada.ca
@regalcap
"I would start at this page, and then have the client complete form NR-74 or NR-73 "
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These people are non-filers…
You did not say why you would not begin at the beginning (ie T1-2019)…?
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The taxpayer should note that it is not CRA’s legal responsibility to file taxes correctly according to the truth, it is the taxpayer’s…
joe.justjoe1- There is a possible issue of whether or not they may still be residents of Canada for the period while outside of Canada. I think prudence would be first to solve this issue, then file tax returns accordingly. You know, the cart behind the horse rather than before…
@regalcap
“You know, the cart behind the horse rather than before”
Exactly - but your NR form reference regarding 2020 is premature.
These non-filers were definitely Canada Tax-Resident.
No evidence has been presented in this thread to indicate in any way that that situation changed at any time.
They were filing as Canada tax Resident up to 2018, contributed to RRSPs, and collected social benefits as Residents.
Then they stopped filing and became non-filers.
Where is their T1-2019?
joe.justjoe1- I’m referencing 2020 because that is what the question is referencing, and what CRA is requesting. I don’t assume to know whether or not 2019 tax return has been filed or not, as it was not stated, nor was it part of the primary question. And if you reviewed NR-73 form, you would know, that 2019 (the year they left) would be included as part of the facts to be determined by CRA International tax and non-resident enquiries office. Therefore, when they do respond, they will make a determination for both years and state the date when (if applicable) non-residency actually began. So, I think I already have both years covered there.
But my apologies, I didn’t realize you have already made that determination on what their residence status is. I should have referred them to you instead of the NR forms. Would have saved them time, I’m sure.
@regalcap
“because that is what the question is referencing”
The OP questioner has indicated that he does not know where to begin or what the situation is. Unfortunately he has made the (incorrect) assumption that he should begin at the end.
The place to start is the beginning.
“Begin at the beginning, go on until you reach the end. Then stop”
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“But my apologies, I didn’t realize you have already made that determination on what their residence status is. I should have referred them to you instead of the NR forms. Would have saved them time, I’m sure.”
Not sure that your sarcasm is helpful…
If you read closely what I posted, I merely reiterated Facts that the OP had posted. According to that, they clearly and obviously had been filing as Tax-Resident. I also mentioned that up until this point there had/has been nothing posted indicating a change in that status, other than their ongoing failure to file Canadian tax returns, apparently since 2018.
If they emigrated in 2019, that matter would have been fully canvassed when they filed a 2019 tax-emigration T1.
