Principal Issues: [TaxInterpretations translation] Can the Canada Revenue Agency agree to reduce an individual's income tax deductions at source on the filing of Form T1213, Request to Reduce Tax Deductions at Source, and presentation of the alternative minimum tax balance to be carried forward?
Position: Each case must be examined individually. Potentially, if a taxpayer provides reasonable evidence that the withholding taxes withheld from income in a year are greater than the amount needed to satisfy the tax liability in the year.
Reasons: Subsection 153(1.1) of the Income Tax Act gives the Minister discretion to authorize a reduced amount of tax to be withheld.
XXXXXXXXXX 2010-036680 Lucie Allaire, Advocate, CGA, D. Fisc.
October 13, 2010
Dear Sir,
Subject: Form T1213 and alternative minimum tax balance to be carried forward
This is in response to your letter dated May 7, 2010, in which you requested our opinion as to whether an alternative minimum tax balance to be carried forward can be taken into account in connection with an application for a reduction of tax source deductions.
Unless otherwise indicated, all legislative references herein are to the provisions of the Income Tax Act (the "Act").
Our Comments
It appears to us that the situation described in your letter and hereinafter summarized could constitute an actual situation involving taxpayers. As explained in Information Circular 70-6R5, it is not the practice of this Directorate to provide comments on proposed transactions involving specific taxpayers otherwise than in the form of an advance income tax ruling. If your situation involved specific taxpayers and one or more transactions, you should submit all relevant facts and documentation to the appropriate tax services office for its opinion.
However, we are able to offer the following general comments that may be useful to you.
Subsection 153(1.1) provides that where the Minister is satisfied that the deducting or withholding of the amount otherwise required to be deducted or withheld under subsection 153(1) from a payment would cause undue hardship, the Minister may determine a lesser amount and that amount shall be deemed to be the amount determined under that subsection as the amount to be deducted or withheld from that payment.
Certain deductions or non-refundable tax credits that a taxpayer may claim for a year that are not reported on Form TD1 Personal Tax Credits Return, or on a particular provincial TD1 return, may be claimed as a reduction of source deductions, provided satisfactory evidence is submitted to support the claim.
To reduce tax deductions at source, an individual needs a letter of authorization from a Tax Services Office.
To obtain a letter of authorization, the individual must send a completed Form T1213, Request to Reduce Tax Deductions at Source, or a written request to the individuals’ Tax Services Office. The individual must explain why less tax should be deducted at source and provide documentation to support the request.
Where a taxpayer has an alternative minimum tax balance to carry forward, the Canada Revenue Agency ("CRA") will agree to consider the taxpayer's request to reduce tax deductions at source for one of the years to which such balance can be carried forward. The taxpayer must make a written request or file Form T1213 and provide proof that the taxpayer has an alternative minimum tax balance to carry forward.
Finally, the CRA will not issue a letter of authorization if a taxpayer has a balance owing or has not filed income tax and benefit returns for a previous year. You can find information on reducing source deductions on our website at: www.cra-arc.gc.ca/tx/bsnss/tpcs/pyrll/clcltng/ncmtx/rdcng/menu-eng.html.
Best regards,
François Bordeleau, Advocate
Manager
Business and Partnerships Section
Income Tax Rulings Directorate.