‘Money on the table’: Those who don’t file tax returns miss benefits delivered by CRA

OTTAWA — Canadians who don’t file their tax returns are sometimes shocked to find out how much money the government owes them for years of missed benefits, says the head of a nonprofit that works to improve financial literacy among income-earning people.

Elizabeth Mulholland, CEO of Prosper Canada, says her organization works with other community partners to provide financial services and literacy programs, including tax return programs that help Canadians who might otherwise not file their tax returns.

She says some people who seek such services find they are owed up to tens of thousands of dollars in benefits they have not collected.

This newfound cash can open the door to a conversation about money and financial planning, she said, recalling that a family could make a down payment on a condo after receiving the money they were owed.

“Often the first question is, ‘Well, what do I do with all this money?'” Mulholland said.

The federal government is increasingly relying on Canada’s Revenue Agency to provide income-related benefits to individuals, including the recent increase in Canada’s Housing Benefit and the temporary doubling of the GST tax credit.

However, some at-risk Canadians are missing out on payments because they don’t file their tax returns.

Taxpayers’ Ombudsman François Boileau raised this issue in his latest annual report, published this week. During a Tuesday news briefing, Boileau said he plans to provide CRA with recommendations to resolve the issue.

“We are still trying to fully understand the problem and propose concrete solutions, so this year there are no recommendations. But you can bet there will be another time,” he said.

Jennifer Robson, Associate Professor of Management at Carleton University, has researched the problem of non-filers in the tax system and its impact on the provision of earnings-related benefits.

In an article published in 2020, Robson and co-author Saul Schwartz found that about 10 to 12 percent of Canadians fail to file their taxes.

Overall, the researchers estimated that the benefits lost to working-age non-filers was approximately $1.7 billion in 2015.

Why don’t people file their tax returns? It’s something of an academic mystery, Robson said.

“We don’t yet have a good, complete understanding of why people aren’t filing the statement,” she said. “Why wouldn’t people file a statement if that means leaving money on the table?”

According to her work, non-filers tend to be male, young and single. And while there were non-filers in all income brackets, they were most concentrated in the lower income brackets.

“It’s a real problem that people are missing out on some of those cash benefits,” Robson said.

It also has implications for the integrity of programs, she said, since many programs use tax returns to verify eligibility.

Based on her experience working with low-income people who haven’t filed their taxes, Mulholland said there’s a whole range of reasons for this, including language barriers, cognitive issues, and even just a lack of awareness.

In 2015, newly-elected Prime Minister Justin Trudeau’s letter of mandate to the national Treasury Secretary called for the CRA to proactively reach out to Canadians who are eligible for tax benefits but are not receiving them.

It also said the CRA should offer to do the work of completing tax returns for some Canadians, particularly those on lower incomes.

A CRA spokesman said in an email that the agency helps more than 600,000 people on modest incomes file their taxes each year by supporting free tax clinics. The agency is also working with Statistics Canada to better understand benefit take-up.

Robson said there is no “silver bullet” for tackling the non-filer problem, but a starting point would be to pre-fill CRA tax returns for Canadians, the information for which is already with the agency.

“Think, for example, of people on welfare. That’s a lot of people. The CRA knows what her income was,” Robson said.

Mulholland said she would like more coordination between federal and provincial government departments and agencies, and community groups, to reach Canadians who may be missing out on benefits because they don’t file their taxes.

“As long as the money in Ottawa just decays, we fail, and that failure has really hard consequences for low-income people who are the intended beneficiaries of that money,” she said.

This report from The Canadian Press was first published on December 16, 2022.

Nojoud Al Mallees, The Canadian Press