Unfashionably Late – Outstanding GST / HST Returns (or any return)

​​​​Being fashionably late for a party works sometimes…but not when it comes to taxes. Getting an ‘invite’ from the tax authority is not usually a time for celebration.

Understandably, the Canada Revenue Agency (CRA) or any tax authority has a long memory and likes to keep track of what it is owed. Expected returns remain on their system forever. While some circumstances can be fixed to support a return was not due, in many cases the return must still be filed – whether tax was owing or not.

What many fail to understand is an outstanding return does not become statute barred from audit review. Normally, a four-year timeframe for assessing begins on the later of the day the return was filed or when it was due. An unfiled return is open to audit pretty much forever as the four-year limit hasn’t even started.

It is not just the return that is a problem. The further away from a current period, the harder it is to remember what happened at that time. Books and records become misplaced. Memories fade. Audit risk is likely higher as well. Not a good feeling when you cannot locate some records either.

While the CRA may notionally assess a taxpayer in some cases, they really prefer the taxpayer file the outstanding return with actual amounts. Once the return is filed, it is marked as filed and the period subject to audit becomes limited after that time in most cases (e.g. four years from that filing date).

Annual Information Return

The CRA has a project underway dealing with outstanding Annual Information Returns (Forms GST111 or RC7291). The Annual Information Return is not a return that results in tax owing or tax refundable but is what the name implies – an information return. It still must be filed by many financial institutions.

The form was required for fiscal years beginning after 2006 for GST / HST purposes. The QST rules subsequently adopted the requirement to file the same information return. For Quebec, the return is required for fiscal years beginning after December 31, 2012.​ A reporting institution is a financial institution that is registered for GST / HST with total income exceeding $1 million. While​ there are some additional criteria and some exclusions, these groups of financial institutions are on CRA’s ‘invite’ list to file the expected returns. Anyone familiar with these forms knows they are complex and onerous to complete.​

The problem with ignoring CRA’s request to file the returns, or not being aware they need to be filed, is CRA still expects the returns. Many are seeing the impact of ignoring the CRA.

We are seeing requests for outstanding returns going back to 2007. Compiling and filing upwards of 10 years of returns in one shot can be very expensive. Many of the financial institutions do not have the resources to do this themselves or give up trying. Whether they do the returns themselves or use professional resources, they are still faced with compliance obligations and with a very short deadline. It is a costly error to have missed the filing deadline.

This is not any different with any other return that was not filed. The takeaway here is being late comes with a cost. Late filing penalties, interest cost on outstanding amounts, time value of money when not filing refunds when they are first available, higher audit selection risk, among other challenges can result from not being compliant.

While none of us are seeing the value in the content of the Annual Information Return, the return must be filed if you are considered a reporting institution.

For more information on the Annual Information Return or any other return compliance needs, contact Jeff Harrison at 306.751.7998 or [email protected]​​​.