Assessment of Returns and Payment Processing

Overview

We undertake a wide range of activities to assess and process individual and business tax returns and payments, including the use of risk assessment, third-party data matching, and information validation to detect and address non-compliance. Our programs contribute to individuals and businesses meeting their filing, reporting, and payment obligations.

Our Expected Results:

1. Assessment and payment processing are timely and accurate.

2. Non-compliance is detected and addressed.

Our Assessments:

1. Met

2. Met

Spending Profile (in thousands of dollars)

Our 2008-2009 priorities

In support of the overarching theme of achieving excellence in program delivery, we committed to undertake a number of initiatives that focused on strengthening service and addressing non-compliance.

Strengthening service

To strengthen service delivery, we focused on increasing the accessibility and efficiency of our programs and services.

Our online self-service offerings continue to attract considerable interest from individuals and businesses. Taxpayers appear to have embraced Quick Access, our online service that enables individuals to view basic tax-related information. Individuals accessed this feature over one million times in 2008-2009.

We enhanced My Account, our secure portal that gives individuals an online view of their tax and benefit information account history as well as transactional services. Successful log-ins to My Account for individuals increased 17% this fiscal year over last, and the number of new individual My Account enrolments increased 2% over the same period.

We made further enhancements to our online service offerings to meet the growing expectation of businesses for convenient and secure access. In 2008-2009, My Business Account registered over 351,000 successful log-ins, as compared with almost 111,000 in 2007-2008. As evidenced by the significant increase in log-ins over the past year, we believe that our efforts to enhance the overall functionality of this service is proving popular with business owners.

Our Represent a client online service offering has also experienced increased usage and interest from the representative community. The number of registrants for this service has increased by close to 42%. The Represent a client service gives representatives a secure, single point of access to multiple clients’ information. We expect this to continue as more representatives become authorized for online access and begin taking advantage of My Business Account’s features. Since its introduction in September 2006, over 450,000 business accounts have had authorizations processed to allow online access.

The CRA remains committed to reducing the burden on small business and will continue to consult and engage business associations to develop and offer services businesses want and need. In response to items identified in the Report of the Canada Revenue Agency’s Action Task Force on Small Business Issues, we issued a Final Report on Action Items to the action task force members in November 2008. Of the 61 identified action items, 31 items were completed. The remaining 30 action items will become part of our day-to-day business, as we pursue meaningful reductions in the burden imposed on small businesses. The Performance Measurement Framework for Compliance Burden Reduction, which measures compliance costs in time and money, will be used to report on future progress in burden reduction measures.

Overall, we continue to make improvements to our programs and service offerings to make it easier, and to provide more options, for Canadians to interact with us.

Addressing non-compliance

We recognize that effective processes to identify and address non-compliance are essential to ensure that individuals pay their required taxes. Our strategies are designed to make the administration of the tax system more equitable and impose less burden on compliant taxpayers.

Our business returns assessing programs provide enhanced support to our compliance programs through post-assessing analysis work. As part of the administration of the Softwood Lumber Products Export Charge Act, 2006 we conduct post-assessing activities relating to the validation of permit information reported by softwood lumber exporters. During the 2008-2009 fiscal year, we verified over 225,000 permits valued at over $3.3 billion. As a result of this review, we reassessed or referred 108 licensees for $5.1 million in permits.

We also conducted first-level reviews of foreign insurance tax exemption claims. During the 2008-2009 fiscal year, we reviewed 675 insurance exemption claims and denied 84 claims with a tax value of $2.2 million.

Effective relationships

As part of our commitment to maintain effective partnerships with federal, provincial, and territorial organizations, as well as certain First Nations, we have sought to expand the use of the Business Number (BN) as a common client identifier for businesses to securely interact with various levels of government. Over the past year we established a new BN partnership agreement with Ontario. The BN partnership agreements cover 51 provincial business programs. In 2008-2009, we implemented a partnership with Ontario to include their Retail Sales Tax and Employer Health Tax programs in the family of programs using the BN as their program identifier. We have also been working towards including three Ontario Ministry of Labour programs and four additional Ministry of Revenue programs in the BN family, anticipated in the fall of 2009.

We believe that our 2008-2009 priority initiatives, when taken together, contributed to our goal of achieving excellence in program delivery by improving the accessibility and efficiency of our programs and services for Canadians.

Expected results

Assessment and payment processing are timely and accurate

Performance Rating: Met

As evidenced in our Performance Report Card , we met our service standards for timeliness of high-volume processing activities. We deposited 99.2% of payments within our standard of 24 hours, and by mid-June, we had processed 99.9% of the individual returns that were filed on time. We also met our targets for T4 and T5 returns processing.

Our primary tool for determining the accuracy of assessed returns is the T1 Quality Evaluation Program which reviews initial assessments of individual tax and benefit returns each year. Our review for 2008-2009 shows that the percentage of processing errors with an impact on a taxpayer’s refund or balance due was less than 1.1%. From 1999 through 2008, the amounts involved were, on average, $245 to $334 per error.

We also ensure accuracy by using two-dimensional (2-D) bar-code technology for computer-generated paper returns. A 2-D bar code contains all of the tax-filer identification and financial data necessary to assess the return, and virtually assures the accurate capture of tax-filer data. At the end of 2008-2009, 38% of all individual paper filed returns had been processed using this technology.

This was the second full year that we processed bar-coded T2 corporation income tax returns. In 2008-2009, 85% of all corporation paper filed returns used 2-D bar codes. As evidenced by the year-over-year data for T2 filing, the availability of electronic options and 2-D bar-coding technology are quickly overtaking the traditional paper (no bar code) filing. Making use of available technology not only makes good business sense, but also supports sustainable development by reducing paper consumption and storage requirements.

Non-compliance is detected and addressed

Performance Rating: Met

Our T1 post-assessing programs are in place to identify and address instances of non-compliance. These are an integral part of the CRA’s overall approach in managing compliance risk and ensuring that individuals pay their required taxes.

Figure 11 Targeted vs. Random Reviews – Average Additional Value Assessed ($) by Review Type

Data quality: Good

We subject returns to further review under our T1 post-assessment programs. The success of this risk-assessment approach is demonstrated by the fact that recoveries for targeted reviews chosen on the basis of risk exceed those for random reviews. During 2008-2009, we made adjustments on almost 31% of over 870,000 T1 returns that were part of a targeted review and on 17% of over 89,000 T1 returns that were part of a random review. The average additional amounts recovered per review were $257 for targeted reviews and $66 for random reviews (see Figure 11).

We have three main types of T1 tax review programs: the Pre-Assessment Review Programs, the Processing Review Program, and the T1 Matching Program. One of our pre-assessment review programs is the Confidence Validity Program. Through this program, various deductions and credits on returns are reviewed and corrected before a Notice of Assessment is issued. We identified an average amount of $471 of additional tax assessed per review, for a total of almost $136 million, an increase of 7.4% over the previous year.

Our Processing Review Program promotes compliance and helps maintain confidence in the fairness of our programs through increased education, effective risk-scoring systems, and a balanced approach to our file selection process. We identified an average amount of $257 of additional tax assessed per review for a total of over $152 million, a decrease of 19.8% from the previous year.

Figure 12 Additional Taxes Assessed Through T1 Reviews

Data quality: Good

Our T1 Matching Program compares information on an individual’s income tax and benefit return with information provided by third-party sources, such as employers or financial institutions. In 2008-2009, this program generated almost 9% more in additional tax assessments than the previous year. This continued upward trend clearly demonstrates the vital role played by third-party information reporting in promoting compliance among individual taxpayers.

As demonstrated in Figure 12, in 2008-2009 the change rate throughout our T1 tax review programs resulted in over $910 million in additional taxes assessed, an increase of 2.3% over the previous year.

An integral part of our overall review program is our Beneficial Client Adjustments initiative. By comparing an individual’s return to third-party information, we identify areas where the taxpayer may have under-claimed credits relating to tax deducted at source or Canada Pension Plan contributions. We adjust these returns and allow amounts to which the taxpayer is entitled and, if applicable, issue a refund. In 2008-2009, we identified and corrected over 238,000 individual returns, resulting in an average beneficial adjustment of $406 per return.

Conclusion

As evidenced by our overall results in 2008-2009, we are confident that we successfully met our goal of providing Canadians with accurate, efficient, and effective processing of their individual and business tax returns and payments. We believe that we have achieved excellence in our program delivery by strengthening our services and enhancing our efforts to address non-compliance.

Performance Report Card

Date modified:

2009-11-05