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Returning a cheque to CRA

I have a T1 client for whom I filed a return, and 2 days later got another T4 slip. She is not set up for direct deposit, and has received a refund cheque from CRA. I subsequently filed the T1-ADJ (after the NOA was posted), and my client knows she will have to pay back the entire refund. She is wondering - should she just send back the cheque? Or cash it and then pay CRA?

Has anybody had experience with this? I know CRA recently posted “unclaimed” cheques on applicable “My Accounts” for individuals - if the cheque is returned, would it end up the same way? Or would CRA realize that the taxpayer was not entitled to it, and cancel the cheque?

Cash the cheque and then pay the amount due. There is no “intelligence” at CRA to handle a returned cheque. Keep it simple and everything works. That’s my opinion.

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@obhorst
LOL - yeah, that’s kind of what I’m thinking, too. Just curious if anyone has seen this particular scenario.

I have sent them back along with a note when I needed them to preserve the date it was originally paid (over paid installments etc) to avoid interest charges on amended returns. Otherwise - I’d just cash the cheque and pay the amount owing. This year there is no interest being charged until Sept 1st.

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I don’t mean disrespect with what I said - there just isn’t a mechanism there to deal with it. I wouldn’t let a client return the cheque in your circumstance.

@obhorst
I’m with you. Returning a check to CRA is not the best procedure.

Checks have a very very long processing cycle. At the best of times you may be looking at 6 to 12 weeks. When I worked at CRA they were all handled by the Ottawa Technology Centre. I am not sure where they are processed now. At that time all checks received at the TSO and at the TC were forwarded to the Ottawa Technology Centre even though at that the cashiers still existed at the TSO (Tax Services Office) and the mail rooms were open and gave manual receipts.

Currently there is no workflow to handle returned checks to reapply them to a new balance outstanding. The processing centre which handles them operate similar to a bank’s backends processing unit. Unless there is a MICR scanable advice slip then the data entry person must decide where to post the check. Sometimes it goes to future installments. Even worse, sometimes it goes to a suspense account which is off-ledge and held in a sub-ledger so that the amount can be found if and only if there is an investigation. This department is not trained in tax.

So, the easiest solution is let the payments cross.

If and only if the amounts are significant, would it be worthwhile to return the check to the TC (Tax Centre), attention T1 Specialty Services, with clear instructions on both the check and the cover letter asking to have the check re-deposited as payment on filing for the tax year for which this transaction should be applied. Then the T1 Speciality Services processor would need to create and internal workflow and manually forward the check to the check processing department. This could take several months to be applied properly based on accrual dates rather than cash dates. This would be worth while if and only if the payment amounts were significantly large and the interest and penalties would be deemed to be significant.

I would recommend that she proceed with cashing the cheque and then wait for the Notice of Re-Assessment at which time she can pay it back. Sending the cheque back could cause all kinds of problems. For example what if CRA still said she owed the money on the Re-Assessment notice even though she had sent the cheque back? Unravelling that might prove onerous to say the least. Keep things simple and cash the cheque.