Original report submitted to the Minister of National Revenue December 2019.

Delays and lack of transparency in the Canada Revenue Agency’s processing of individual income tax and benefit returns and adjustment requests.

Recommendation #1

The Taxpayers’ Ombudsman recommends the Canada Revenue Agency publish service standards for processing late-file T1 income tax and benefit returns, and all T1 adjustment requests excluded from the current service standards, so it can accurately measure and report on whether it is meeting its requirement to process income tax and benefit returns and adjustment requests in a timely manner, per section 152(1) of the Income Tax Act and articles 5, 6 and 13 of Taxpayer Bill of Rights.

CRA’s response - Recommendation #1

The CRA partially agrees with this recommendation.

This recommendation pertains to the theme of service standards and the CRA has provided an overarching response on this theme.

The CRA is committed to processing tax returns with all due dispatch. Its service standards publicly state the level of performance that citizens can reasonably expect to encounter from the CRA under normal circumstances. These results are published annually. It should be noted that late filed returns are not considered to fall within normal circumstances and is usually representative of tax filers who have not met their obligations under the ITA. As a result, the CRA does not agree with the recommendation.

The CRA will however assess the feasibility of establishing a service standard for complex adjustment requests by December 2020.

2021 Update - Recommendation #1

The CRA has been assessing the feasibility of establishing a service standard for complex adjustment requests by running a pilot of a service standard for complex adjustments for 2020-21. The service standard for complex adjustments will continue to be a run as a pilot for 2021-22.

Recommendation #2

The Taxpayers’ Ombudsman recommends the Canada Revenue Agency improve its service standards by:

increasing the percentage of time it is expected to meet the service standard for digitally-filed T1 income tax and benefit returns.

decreasing the length of time it takes to process paper-filed T1 income tax and benefit returns.

CRA’s response - Recommendation #2

The CRA partially agrees with this recommendation.

This recommendation pertains to the theme of timeliness of processing and the CRA has provided an overarching response on this theme.

The CRA continually pursues technological enhancements so as to reduce processing times for both digitally-filed and paper-filed T1 income tax and benefit returns.

For example, further renewal of the processing system for individual returns will be completed in 2020. Utilizing this new foundation, the volume of returns that necessitate human intervention will be decreased and processing times for those returns that require manual (re)assessments will be reduced.

The CRA agrees to review and update service standards accordingly as technological enhancements allow faster processing.

2020 update - Recommendation #2

The CRA confirms that the final release of the renewal of its processing systems for individual returns was introduced in February 2020, and forms the foundation for improved program delivery. Since its introduction, the volume of returns requiring manual intervention has decreased and processing times have improved.

The CRA remains committed to pursuing technological enhancements to reduce processing times for both digitally-filed and paper-filed T1 income tax and benefit returns and continues to review and update its service standards accordingly.

The CRA has addressed this recommendation in full.

Recommendation #3

The Taxpayers’ Ombudsman recommends the Canada Revenue Agency improve the clarity, transparency, and consistency of the language it uses to describe the types of T1 income tax and benefit returns and adjustment requests included and excluded from the application of the various service standards, and the calculation of the CRA’s performance against those standards, ensuring to address issues raised in this report about confusion on certain types of workflows.

CRA’s response - Recommendation #3

The CRA partially agrees with this recommendation.

This recommendation pertains to the theme of service standards. Please see the CRA’s overarching response on this theme.

The CRA conducts a review of its service standards annually, including the standards related to the processing of T1 returns. The CRA is committed to continuing to undertake these annual reviews to ensure clarity, transparency, and consistency of the language used in the description of standards.

The CRA further indicates that as part of this process, it will review the assessing and reassessment service standards to ensure the language is consistent. This review will be completed by December 2020.

2021 Update - Recommendation #3

As part of the annual service standard process, the CRA has reviewed the assessing and reassessment service standards to ensure the language is consistent. The review was completed in January 2021. Wording changes were made to the T1 reassessing service standards as a result of the review.

2021-22 CRA Service Standards webpage: Service Standards 2021-22 – Canada.ca

How to change a return webpage: How to change your return – Canada.ca

Recommendation #4

The Taxpayers’ Ombudsman recommends the Canada Revenue Agency clearly indicate in its published information on service standards for T1 adjustment requests, the standard timeframes for those requests made verbally.

CRA’s response - Recommendation #4

The CRA partially agrees with this recommendation.

This recommendation pertains to the theme of service standards. Please see the CRA's overarching response on this theme.

The CRA indicates that the service standard for verbal adjustment requests is included in the overall service standard for T1 adjustment requests received via paper. It is important to note that there are fewer than 40,000 verbal adjustments per year with an expectation that this number will decrease further as a result of self-service options available to Canadians. The CRA will not establish a separate service standard for verbal adjustments requests

As part of its annual review, the CRA commits to reviewing the wording of the T1 Adjustments service standard to ensure that requests received via telephone are clearly outlined. This is expected to be completed by December 2020.

2021 Update - Recommendation #4

As part of its annual service standard process, the CRA reviewed the wording of the T1 Adjustments service standard to ensure that requests received via telephone are clearly outlined. The review was completed in January 2021, and the wording of the T1 reassessments – paper service standard now includes the wording to include telephone enquires that are re-directed to the tax centres for processing.

2021-22 CRA Service Standards webpage: Service Standards 2021-22 – Canada.ca

Recommendation #5

The Taxpayers’ Ombudsman recommends the Canada Revenue Agency publish approximate processing timeframes for T1 income tax and benefit returns and adjustment requests, by type of processing workflow.

CRA’s response - Recommendation #5

The CRA partially agrees with this recommendation.

This recommendation pertains to the theme of exception processing and the CRA has provided an overarching response on this theme.

The CRA agrees to make available more information on processing timeframes, by type of processing workflow.

A tool (Check CRA Processing Times) was made available on the CRA’s Canada.ca website beginning in December 2019. The next phase will be a progress tracker for account specific enquiries that will be in the CRA secure portals starting in May 2021. This tool will inform taxpayers or their representative when a file was received and its status in the processing cycle.

Recommendation #6

The Taxpayers’ Ombudsman recommends when reporting its performance against the service standards, that the Canada Revenue Agency report separately on:

1. digitally-filed T1 income tax and benefit returns,
2. paper-filed T1 income tax and benefit returns,
3. digitally-filed T1 adjustment requests,
4. paper-filed T1 adjustment requests, and
5. verbal T1 adjustment requests.

CRA’s response - Recommendation #6

The CRA partially agrees with this recommendation.

This recommendation pertains to the theme of service standards. Please see the CRA’s overarching response on this theme.

The CRA currently reports on its digitally-filed and paper-filed T1 returns and digitally-file and paper-filed adjustment requests separately against each service standard. The service standard for verbal adjustment requests is already included in the overall service standard for T1 adjustment requests received via paper. As a result, the CRA does not agree with the recommendation to establish a separate service standard for verbal adjustments requests.

As part of its annual review, the CRA commits to reviewing the wording of the T1 Adjustments service standard to ensure that requests received via telephone are clearly outlined. This is expected to be completed by December 2020.

2021 Update - Recommendation #6

As part of its annual service standard process, the CRA reviewed the wording of the T1 Adjustments service standard to ensure that requests received via telephone are clearly outlined. The review was completed in January 2021, and the wording of the T1 reassessments – paper service standard now includes the wording to include telephone enquires that are re-directed to the tax centres for processing.

2021-22 CRA Service Standards webpage:

Service Standards 2021-22 – Canada.ca

Recommendation #7

The Taxpayers’ Ombudsman recommends the Canada Revenue Agency (CRA) change the wording used in publicly describing, and reporting its performance against, service standards for processing T1 income tax and benefit returns, from "fiscal year" to "filing season"; and if unable to do so, ensure information is clearly publicly provided about the specific period of time on which the CRA is reporting.

CRA’s response - Recommendation #7

The CRA partially agrees with this recommendation.

This recommendation pertains to the theme of service standards. Please see the CRA’s overarching response on this theme.

The CRA has taken steps to ensure that the specific period of time associated with the reported results for the T1 assessing service standards is clearly described beginning with the 2018-19 performance results.

Recommendation #8

The Taxpayers’ Ombudsman recommends the Canada Revenue Agency notify filers, by letter when their T1 income tax and benefit return (return) is referred to any specialized processing workflow where processing times may exceed the published service standard, and where the filer has not signed up for online mail. The letter should include a timeframe within which the filer can reasonably expect their return to be completed, or the revised service standard should the CRA have created one. Where a filer has signed up for online mail, pending full implementation of phase two of the progress tracker, that the CRA advise the filer through online mail when their return is referred to any specialized processing workflow where processing times may exceed the published service standard.

CRA’s response - Recommendation #8

The CRA partially agrees with this recommendation.

This recommendation pertains to the theme of exception processing. Please see the CRA’s overarching response on this theme.

The CRA agrees that taxpayers should be informed with respect to the status of their files.

A tool (Check CRA Processing Times) was made available on the CRA’s Canada.ca website beginning in December 2019. The next phase will be a progress tracker for account specific enquiries that will be in the CRA secure portals starting in May 2021. This phase of the solution will enable taxpayers to track the progress of their request through the CRA secure portals (My Account, My Business Account). This tool will inform taxpayers or their representative when a file was received and its status in the processing cycle.

The CRA will monitor the success of this new tool and determine if further enhancements, such as letters, should also be considered.

Recommendation #9

The Taxpayers’ Ombudsman recommends the Canada Revenue Agency include in the acknowledgement letter sent for complex T1 adjustment requests a timeframe within which the filer can reasonably expect their T1 adjustment request to be completed.

CRA’s response - Recommendation #9

The CRA partially agrees with this recommendation.

This recommendation pertains to the theme of exception processing. Please see the CRA’s overarching response on this theme.

As noted in the response to recommendation #1, in the event that the CRA is able to establish a service standard for complex adjustments, it will provide taxpayers with the timeframe within which they can reasonably expect their T1 adjustment request to be completed into outgoing acknowledgment letters.

2021 Update - Recommendation #9

The CRA has been assessing the feasibility of establishing a service standard for complex adjustment requests by running a pilot of a service standard for complex adjustments for 2020-21. The service standard for complex adjustments will continue to be a run as a pilot for 2021-22.

2022 Update - Recommendation #9

The service standard for complex adjustment will continue to be run as a pilot for 2023-2024. We are seeking to continue our pilot to assess against a more normalized filing season. We have had some inventory challenges with adjustments specifically last season with the transition to digital mail.

This action plan item is ongoing.

Recommendation #10

So that it may identify trends; ensure a better understanding of processing timeframes, inventories, delays and the causes thereof; and ensure a better understanding of the types of filers who may experience the highest negative impact of delays in processing, the Taxpayers' Ombudsman recommends the Canada Revenue Agency:

1. improve its analytics,
2. ensure internal consistency in terminology and definitions,
3. implement better tracking of the processing of late-filed T1 income tax and benefit returns, and
4. implement better tracking of the processing T1 income tax and benefit returns and adjustment requests by specialized processing workflow.

CRA’s response - Recommendation #10

The CRA partially agrees with this recommendation.

This recommendation pertains to the theme of timeliness of processing. Please see the CRA's overarching response on this theme.

The CRA agrees with these recommendations. The renewal of the individual returns processing system brings with it an improved capability to capture data and better track inventories and returns through each step of processing. These improvements will be fully completed in 2020. As a result, the CRA will improve its analytics and improve its tracking systems. The CRA is also committed to ensuring internal consistency in terminology and definitions.

2020 update - Recommendation #10

The CRA confirms that the final release of the renewal of its processing systems for individual returns was introduced in February 2020, and forms the foundation for improved program delivery.

The CRA is now better able to track its inventories and returns as they are processed and continues to improve its analytics and tracking systems.

The CRA reconfirms its commitment to ensuring consistency in terminology and definitions.

The CRA has addressed this recommendation in full.

Recommendation #11

The Taxpayers’ Ombudsman recommends the Canada Revenue Agency change its first-in, first-out policy for the processing T1 income tax and benefit returns in specialized processing workflows and the processing of complex T1 adjustment requests:

1. to ensure the T1 income tax and benefit returns and adjustment requests of those who may experience the highest negative impact of delays are processed on a priority basis (for example, those whose benefits are impacted by a delay).
2. to first assess whether additional information may be needed from the filer or elsewhere, and request the information at that time.

CRA’s response - Recommendation #11

The CRA partially agrees with this recommendation.

This recommendation pertains to the theme of timeliness of processing. Please see the CRA’s overarching response on this theme.

The first-in, first out method is predominantly used by the CRA in order to maintain fairness and efficiency in processing. The CRA also takes steps to recognize the importance of the issuance of benefits. As a result, the CRA does not agree with the recommendation to change its first-in, first-out policy.

2022 Update - Recommendation #11

The CRA continues to explore various methodologies to improve processing times for all workflows. As an example, the CRA has two initiatives underway (currently planned for Feb 2024) that will increase the types of returns to be filed electronically vs. by paper only:

1. The first one will remove certain restrictions for non-residents in order to allow them to EFILE their tax return;
2. The second one will allow tax returns with a non-Canadian address, to be filed via NETFILE

The implementation of these initiatives will increase the types of tax returns that can be electronically filed, decrease the volume of returns that necessitate human intervention, and vastly improve processing times for specialized processing or those returns that require manual (re)assessments.

In addition, the CRA has made improvements to assist taxpayers in understanding the time needed to complete their files. A progress tracker is now available in the secure portals that lets taxpayers, or their representative know when a file was received, as well as its status during the process cycle.

This action plan item is ongoing.

Recommendation #12

The Taxpayers’ Ombudsman recommends the Canada Revenue Agency (CRA) reduce the time taken to refer T1 income tax and benefit returns and adjustment requests to different areas within the CRA during processing, to minimize the time T1 income tax and benefit returns and adjustment requests sit in a queue or inventory before they are worked.

CRA’s response - Recommendation #12

The CRA partially agrees with this recommendation.

This recommendation pertains to the theme of timeliness of processing. Please see the CRA’s overarching response on this theme.

The CRA agrees to continually monitor and analyze trends with respect to all tax returns, identifying areas in the process that require improvements to ensure returns are processed as expeditiously as possible.

Recommendation #13

The Taxpayers’ Ombudsman recommends the Canada Revenue Agency examine the entirety of the journey of T1 income tax and benefit returns and adjustment requests and the full impact of processing timelines on filers, to reduce processing timeframes of T1 income tax and benefit returns and adjustment requests, where possible, and address the root cause(s) of delays. This analysis should also be applied in the allocation of Budget 2019 additional funding for processing T1 adjustment requests, to ensure funds are allocated effectively to address the root causes(s) of delays.

CRA’s response - Recommendation #13

The CRA partially agrees with this recommendation.

This recommendation pertains to the theme of timeliness of processing. Please see the CRA’s overarching response on this theme.

The CRA agrees to continue to monitor and analyze trends with respect to all tax returns identifying areas in the process that require improvements to ensure returns are processed as expeditiously as possible.

It should be noted that the vast majority of returns filed are already processed in a timely and expedient manner. For example, during the 2019 filing season, the service standard for assessing T1 returns was met over 97% of the time (97.2% for digital returns and 97.4% for paper returns).

As the CRA must respond to numerous pressures regarding its services and programs, a thorough process exists so as to allocate funding to programs across a wide range of activities, and new funding may be requested via the Federal Budget. The CRA regularly reviews the program to determine the appropriate resource allocations.

Recommendation #14

The Taxpayers’ Ombudsman recommends that, where possible, the Canada Revenue Agency address system limitations so more T1 income tax and benefit returns can be processed in a more timely manner with less manual intervention.

CRA’s response - Recommendation #14

The CRA partially agrees with this recommendation.

This recommendation pertains to the theme of timeliness of processing. Please see the CRA's overarching response on this theme.

The CRA agrees to continue to address system limitations in order to reduce processing times and reduce manual intervention.

It should be noted that the CRA is nearing the completion of its multi-year renewal of the processing framework for individual returns. Once completed, CRA will be able to further pursue the modernization of its service offerings such as increasing the types of tax returns that can be electronically filed, decreasing the volume of returns that necessitate human intervention, and improving processing times for those returns that require manual (re)assessments. This new capability will be available in February 2020.

2020 update - Recommendation #14

The CRA confirms that the final release of the renewal of its processing systems for individual returns was introduced in February 2020, and forms the foundation for improved program delivery.

The CRA reconfirms its commitment to continue to address system limitations and further pursue the modernization of its service offerings.

The CRA has addressed this recommendation in full.

Recommendation #15

The Taxpayers’ Ombudsman recommends the Canada Revenue Agency utilize improved analytics and implement more transparent policies and procedures relating to the information call centre agents can provide to filers, including where the T1 income tax and benefit return or adjustment request is being processed, what is causing processing delays beyond the applicable service standard, as well as an anticipated timeframe for processing.

CRA’s response - Recommendation #15

The CRA partially agrees with this recommendation.

This recommendation pertains to the theme of exception processing. Please see the CRA’s overarching response on this theme.

The CRA agrees that taxpayers should be informed with respect to the status of their files, and when possible, call centre agent provide filers information on the status of their files.

The CRA has already taken steps to ensure agents have access to information and tools, in order to provide the status of taxpayer files. In May 2021, the second phase of progress tracker will enable taxpayers to track the progress of their request through the CRA secure portals (My Account, My Business Account). This tool will inform taxpayers or their representative when a file was received and its status in the processing cycle.

The CRA will monitor the effectiveness of this service and determine if it meets the needs of Canadians, and determine if and how this information can be used by call centre agents.

Overarching responses

1. Service standards theme

The CRA is responsible for the administration of the Income Tax Act (ITA) and related legislation, as well as benefit and tax credit programs on behalf of the federal, provincial, territorial, and First Nations governments. Over 29 million tax returns are received each year, with 25 million filed between mid-February and April 30th. The CRA strives to process all of these returns in an efficient manner and has made significant improvements over the last several years. For example, the CRA met the service standard over 97% of the time (97.2% for digital returns and 97.4% for paper returns).

Service standards publicly state the level of performance that citizens can reasonably expect to encounter from the CRA under normal circumstances. The CRA sets targets for achieving each service standard based on operational realities, infrastructure, available resources, historical performance, degree of complexity of the work, and expectations of Canadians.

While the majority of returns are processed within standard, there are exceptions that occur during the short timeframe of the filing season. For example, returns that have inaccurate or missing information can naturally result in delays. The ITA is complex and occasionally necessitates longer manual processing for some types of tax returns. Small volumes of each situation means the CRA’s system cannot be cost-effectively programmed to assess these returns without creating an unacceptable risk to the system’s integrity.

Furthermore, the CRA’s mandate includes ensuring that Canada’s self-assessment tax system is sustained. The CRA’s review activities promote awareness of and compliance with the laws it administers and plays an important role in maintaining the integrity of, and the Canadian public’s confidence in the tax system. To this end, the CRA continues to audit, verify and match during the filing period which results in a small percentage of returns taking longer to finalize.

Despite these realities, the CRA’s efforts to improve service as mentioned above have facilitated annual changes to the returns processing standards allowing more transparency and clarity for both citizens and non-residents. This process is ongoing, the CRA regularly revises its service standards to make sure that they are up-to-date and relevant.

2. Timeliness of processing theme

Historical results illustrate that the vast majority of files are processed within the timeframes identified in the CRA’s service standards. Given the short period of the filing season, combined with operational realities such as infrastructure, available resources, and the complexity of the ITA, the service standards represent a level of performance that the majority of citizens can rely upon.

The CRA acknowledges that it experienced some transitional difficulties with the introduction of the first major phase of its technological renewal in February 2016, resulting in higher than normal inventories. In November 2016, Service Renewal consolidated the workload from seven to three Tax Centres (TCs) which required the TCs to hire and train large numbers of new employees. The resulting learning curve and impact on productivity took some time to diminish. These changes were necessary to modernize both the CRA’s systems and operations and the past filing season saw substantial improvements in processing timeframes.

The CRA is committed to being a fair, helpful, and responsive tax administration with a client-centric focus. Its commitment to service excellence in this regard has resulted in a number of filing improvements over the last few years. This includes sharing data on information slips via the AutoFill my Return service, simplifying the completion of returns on behalf of certain fixed-income Canadians, real-time tax return processing, improved ability to track files through each stage, more up-front validation of reported income, and immediate availability of notices of assessment. Many of these initiatives have stemmed from both increases in digital filing and a major technological investment that will see the complete redesign of the returns processing foundation.

Technological improvements are ongoing and the renewal of the processing framework for individual returns will be completed in 2020. Utilizing this foundation, the CRA will be continuing the modernization of its service offerings such as increasing the types of tax returns that can be electronically filed, decreasing the volume of returns that necessitate human intervention, and vastly improving processing times for those returns that require manual (re)assessments.

3. Exception processing theme

As indicated by the CRA’s year-over-year results, the majority of tax returns and reassessments are processed expeditiously. Small volumes do need to be diverted from the normal flow due to errors, omissions, validation activities, or technical complexities. The timeframes involved in each type of situation are very difficult to accurately predict since there are many variables including the time needed for taxpayers to correct information or provide documentation, as well as the effort required by various areas within the CRA that must utilize specific expertise, to finalize complex files.

The CRA is making improvements to assist taxpayers in better understanding the time needed to complete their files. The first step is to improve the information available on the Canada.ca website by implementing a tool that will provide taxpayers with general processing times for a range of CRA services and an indication of when they might be able to expect a response. In addition, a progress tracker for account specific enquiries will be available in the secure portals beginning in May 2021, that will let taxpayers or their representative know when a file was received, as well as its status during the processing cycle. This same information is already available to call centre agents and is communicated to taxpayers when requested.