Principal Issues: [TaxInterpretations translation] How does the CRA intend to regularize payment allocation problems?
Position: The CRA suggests that taxpayers use personalized business remittance vouchers that can be obtained quickly and easily through the CRA Web site.
FEDERAL TAX ROUNDTABLE
APFF CONFERENCE 2010
Question 50
Payment of a tax balance for the fiscal year already completed and allocation of the amount by CRA to the current fiscal year:
The following situation is relatively mundane, but is a real administrative problem. Within 60 or 90 days (as the case may be) of its fiscal year-end, a corporation sends the federal tax authorities a cheque representing its tax balance for the fiscal year just ended. The same action is repeated for Québec purposes (within 60 days in the case of Québec). Clear instructions are written on the cheque (a letter of instruction may also accompany the cheque) indicating that the amount is for the fiscal year already ended and not as a deposit for the current fiscal year.
Despite this specification on the cheque, it is common for a Notice of Assessment sent to the corporation by the CRA to indicate a balance owing that essentially represents an amount equal to the cheque that was intended to cover the tax balance plus a small additional amount for interest on the outstanding balance.
The reason for this notice of assessment is that the cheque received by the CRA was applied to current year instalments rather than to tax payable. This results in unnecessary administrative effort on the part of both taxpayers and their accountants and on the part of the CRA. It is important to note that the same problem is definitely not occurring on the Quebec tax authorities' side. The purpose of that comment is not to systematically denigrate the federal tax authorities by comparing them with their Quebec counterpart, but rather to make them aware that there is a real problem on this specific issue and that there is clearly a solution.
While we recognize that with the introduction of "My Business Account" on the CRA website, this problem can be resolved relatively easily, the fact remains that a large number of SMEs are not yet using this service.
Question to the CRA
What does the CRA intend to do to regularize this allocation problem that is currently a systemic problem at the CRA?
CRA Response
The CRA recognizes that the allocation of payments sometimes results in misapplications to taxpayer accounts and we apologize for the inconvenience this can cause to taxpayers and their representatives.
Staff at our processing centres work to ensure that all payment instructions are followed in accordance with taxpayer requests. However, we are aware that errors can occur. While we make every effort to minimize such errors, we suggest that taxpayers send a remittance voucher with their payment rather than a letter. Those remittance vouchers are personalized, coded with taxpayer information and attached to the statement of account sent, thus ensuring that payments are applied to the correct account and taxation year.
Customized remittance vouchers for businesses can be obtained quickly and easily through the CRA Web site at http://www.cra-arc.gc.ca/esrvc-srvce/tx/bsnss/rqsts/menu-eng.html or through the "My Business Account" service at http://www.cra-arc.gc.ca/esrvc-srvce/tx/bsnss/myccnt/menu-eng.html. Authorized representatives can also request personalized remittance vouchers for their clients through the "Represent a client" service at http://www.cra-arc.gc.ca/esrvc-srvce/tx/rprsnttvs/menu-eng.html. When remittance vouchers are requested electronically, they are mailed the next business day to the taxpayer's address on file.
Response prepared by:
Caitlin O'Neill
Field Office Accounting Adjustments Inquiries Section
Business Accounting Programs Division
Business Returns Directorate
Assessment and Benefit Services Branch
Income Tax Rulings Directorate officer responsible:
Isabelle Landry
(450) 623-0193|
October 8, 2010
2010-037370.