Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Principal Issues:
1. What is the definition of 'tax is payable' in 150(1.1)(b)(i).
2. Is the T1 Guide correct in saying an individual does not have to file a return unless there is a balance owing.
Position:
1. The meaning is the tax payable as calculated under Division E.
2. No.
Reasons:
The Guide uses the term ‘balance owing’ in the sense of ss. 156.1(4). This is not correct. Subparagraph 150(1.1)(b)(i) exempts individuals who have no tax payable, from filing. The tax payable amount does not include installment payments and tax withheld.
June 15, 2000
Human Resources HEADQUARTERS
200 Laurier Street West David Shugar
957-2134
Attention: Charlene Hall
2000-002865
Section 150 and subsection 150(1.1) of the Income Tax Act (the "Act")
This is in reply to your correspondence of May 29, 2000, requesting our comments on the application of section 150 and subsection 150(1.1) of the Act, and whether tax payable includes amounts paid on account, such as tax withheld at source, and installments.
Our Comments
Subsection 150(1) of the Act requires taxpayers to file a return of income for each taxation year. Subparagraph 150(1.1)(b)(i) of the Act states that an individual is not required to file an income tax return unless “tax is payable under this Part by the individual for the year.”
In our view, the phrase “tax is payable,” as used in subparagraph 150(1.1)(b)(i) of the Act, has the same meaning as “tax payable” used in Divisions E and E.1. We believe that the intent of Parliament is that a reference to “tax payable” is a reference to the amount payable before deducting amounts paid on account of that liability (by way of installment or withholding).
An individual’s tax payable under Part I of the Act is calculated in Division E (sections 117 to 127.41 of the Act), subject to the minimum tax rules in Division E.1. The various additions and deductions in Division E are components of tax payable, by virtue of the wording of the provisions in Division E, such as ‘For the purpose of computing the tax payable under this Part,’ ‘there shall be added in computing an individual’s tax payable,’ and ‘there may be deducted from the amount that would, but for this section, be the individual’s tax payable’; wording that indicates that “tax payable” includes all the additions or deductions described in the Division.
Under subsection 156.1(4) of the Act, tax withheld under subsection 153(1) of the Act (Division I), is deducted from an individual’s tax payable, as determined in Division E, to arrive at the amount the individual must pay, by the individual’s balance due day. Subsection 156.1(4) of the Act states:
Every individual shall, on or before the individual's balance-due day for each taxation year, pay to the Receiver General in respect of the year the amount, if any, by which the individual's tax payable under this Part for the year exceeds the total of
(a) all amounts deducted or withheld under section 153 from remuneration or other payments received by the individual in the year, and
(b) all other amounts paid to the Receiver General on or before that day on account of the individual's tax payable under this Part for the year.
The wording of subsection 161(1) of the Act also indicates that taxes payable do not include taxes withheld on account of the individual. It states:
Where at any time after a taxpayer's balance-due day for a taxation year
(a) the total of the taxpayer's taxes payable under this Part and Parts I.3, VI and VI.1 for the year
Exceeds
(b) the total of all amounts each of which is an amount paid at or before that time on account of the taxpayer's tax payable and applied as at that time by the Minister against the taxpayer's liability for an amount payable under this Part or Part I.3, VI or VI.1 for the year, the taxpayer shall pay to the Receiver General interest at the prescribed rate on the excess, computed for the period during which that excess is outstanding.
On page 6 of the 1999 General Income Tax and Benefit Guide (the “Guide”) it states that an individual has to file a return if they have a balance owing. Page 39 of the Guide describes the term “balance owing” as follows:
If line 435 is more than line 482, enter the difference on line 485. This is your balance owing.
The term “balance owing” is not used in the Act. The term, as used on page 39 of the Guide, and on page 8 of the guide regarding the calculation of interest and penalties, has the same meaning as the remainder amount in subsection 156.1(4) of the Act. Therefore, according to the Guide, an individual who does not have a remainder described under subsection 156.1(4) of the Act, would not have to file a return.
In our view, the statement in the Guide that individuals do not have to file a return unless they have a balance owing, is incorrect. The statement does not reflect the condition in subparagraph 150(1.1)(b)(i) of the Act.
In our view, an individual is required to file a return under subsection 150(1) of the Act, in a situation where the individual may also be entitled to a refund. This would be the case if the tax withheld under subsection 153(1) of the Act, or installments made during the year, exceed the amount of tax payable determined in Part I of the Act. However, if such an individual files that year’s return late, or does not file at all, no penalties or interest could be assessed under subsections 162(1) or 161(1) of the Act, as no amount of the tax payable was unpaid when the return was required to be filed, and there is no unpaid amount on which interest could be charged.
Under subsection 150(2) of the Act, the Minister may require any person, whether or not the person is liable to pay tax under Part I of the Act, to file a return. This provision is the support for the comment on page 6 of the Guide that an individual has to file a return if “We send you a request to file a return.”
You can get a copy of the Act in the library or from one of the publishing companies such as CCH or Prentice Hall, on paper or on CD-ROM. The Canada Customs and Revenue Agency does not provide a version of the Act on its website, nor is there a version on the Justice Department’s website (where other legislation is reproduced).
Roberta Albert, CA
for Director
Business and Publications Division
Income Tax Rulings Directorate
Policy and Legislation Branch
CC: Guy Levesque, Client Services Directorate-Business Publications Section
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