Federal ombudsman will look into tax complaintsAudits of those claiming Northern resident deductions flagged as a potential systemic issue
Jessica Davey Quantick
Northern News Services
Wednesday, September 28, 2016
A federal ombudsman says her office will be looking at complaints that Northerners claiming Northern resident deductions are disproportionately targeted for audits.
The Taxpayers Ombudsman, Sherra Profit, says her department is aware of concerns around people audited after claiming the northern resident deductions. - Jessica Davey-Quantick/NNSL photo
"We have received a number of complaints on that issue recently. It has been brought to our attention," said the taxpayers ombudsman Sherra Profit at a news conference in Yellowknife last week.
"We've heard from a number of people with a number of different permutations of it and different aspects of it but that's as far as it's gone."
This was Profit's second stop in the North, after Iqaluit.
Her office is a "last resort" she said, after complaints have already made their way through a number of different avenues.
To determine whether it is a systemic problem, her department will do further research, and if warranted, an investigation. Once the investigation is complete, it will be passed along to the minister of national revenue, who would determine what actions might apply.
"There are a number of factors that get considered, because each situation can be very different. It's not like we have a checklist where we say it has to meet all these criteria," she said. "As long as it's affecting a larger number of people, or a segment of the population, as long as it's service related and it is an issue we can examine it."
For many Yellowknife taxpayers, that action can't come soon enough. Steven Ford, a tax preparer with H&R Block in Yellowknife says between the off-season audits and reviews H&R Block does, "95 per cent would be because of the Northern resident deductions."
He estimates the number of audits can range from 500 to 1,000 each year, which he says is "a fair amount," considering how many people in Yellowknife claim the deductions.
To qualify for Northern residents deductions, a person must have lived permanently in the North for at least six consecutive months. All of the NWT is within a Northern zone that can claim full deductions. The deduction is split into two parts: the basic residency amount, previously $8.25 a day, and an additional amount that doubles the deduction to $16.50, for people who live alone. With the new deductions brought in by the 2016-17 budget, these deductions will rise to $11 per day, or $22 if for those who qualify for the additional deduction.
This is no small amount. Ford says someone making between $50,000 and $75,000 a year and paying a marginal tax rate of roughly 30 per cent, that could work out to a deduction of between $3,000 and $6,000, at the old rates.
"So it's turning around and saving you $1,800 on your tax refund, that's $1,800 more than you would normally receive," he said.
With the increase in the deduction this year, that amount is going to rise even more - which he says explains why the Canada Revenue Agency is so quick with the audits.
With a rental vacancy rate that's only predicted to rise this year to around three per cent, many people in Yellowknife may be sharing accommodation or renting out spare rooms, which Ford says can make claiming the deductions tricky - two roommates could both claim the addition deduction on the same address, for example, triggering an audit.
He couldn't confirm if many people had multiple audits.
"It does happen. Based on what we've been told by Revenue Canada that it is an automated program through their systems that randomly chooses social insurance numbers that are also claiming the Northern resident deduction," he said.
Ford says most of the time just an inconvenience for someone to provide that information and clear up the issue. However, if it can't be resolved within 60 days, Canada Revenue Agency will disallow the deduction and bill for taxes payable.
"I find a lot of people they see paperwork from Revenue Canada and it is nerve wracking for some people. They don't even want to read it. Revenue Canada has a way of wording things that makes it not difficult to understand, but that you want to get help to make sure you're not messing around because the consequences can be money, right?" he said.
That was one of the main things Profit says she hopes to address as Ombudsman.
"The CRA is rolling out changes in that correspondence. We're keeping an eye on that to ensure it is clear for everyone," she said, adding improved telephone access, improved clarity and easy-to-understand correspondence were on the top of her priority list.