When the CRA Gets It Wrong

Okay, ladies and gentlemen—this is going to be a long one because I was flabbergasted when I heard this.

Last week, you may have heard about an unsettling statistic: an audit (done by the Canadian government’s own auditors) of the CRA’s call centres found that a large number of taxpayers who actually got through to an agent were given incorrect information. Office of the Auditor General of Canada+2Wealth Professional+2

A whopping 83 percent of the time, incorrect information is given. EIGHTY-THREE PERCENT!!!

If you’re someone who pays close attention to your money (which I assume you are if you follow this blog), you might be asking: “Wait — if I call the CRA and they tell me something wrong, and I rely on their advice when doing my taxes, what then? Am I stuck paying a fine or penalty if it turns out the advice was wrong?” This was the first question that ran through my mind when I heard this news.

Guess what - you’re still responsible for your own tax return:
You’re the taxpayer. When you file your return, you are making declarations under the law. If you file incorrectly (e.g., claim a credit you’re not eligible for, omit income, etc), the CRA may reassess, charge interest, or impose penalties.
For example: The CRA states that you may face a “false statements or omissions penalty” if you knowingly or under gross negligence make incorrect statements. Canada.ca+1
What this means: relying on what you’ve been told (even by a CRA agent) doesn’t automatically shield you from having to correct your return or pay more taxes, interest, or penalties if the return is wrong.

You’re the taxpayer

You’re still responsible for your tax return

There is a provision for relief in some cases:
The CRA’s “Cancel or Waive Penalties and Interest” page says that if errors in CRA materials or incorrect information provided by the CRA led you to file in error, you may apply for relief of penalties or interest. Canada.ca

But we all know how it goes with government agencies. You have to prove you got the wrong information. Somehow, in my experience, government agencies always know how to cover their butt.

Key factors that matter if you choose to request relief:

• You must show that you relied on the advice/information of the CRA.

• You must show that the advice was wrong or misleading (i.e., the CRA’s error).

• You must have acted in good faith (you weren’t deliberately misleading or negligent).

• You must have been reasonably diligent (i.e., you took reasonable steps to verify the answer or clearly asked the agent the question).

• The relief request must be timely (in many cases, it relates to years within the CRA’s 10-year limit for interest/penalties).

• Relief does not apply to the assessed tax itself — you’ll still owe any tax you should have paid. (Of course!) Relief is about penalties and interest.

What this means for you, especially in the “single-income household” scenario:

Because you know what it’s like to stretch a dollar, raise a family on one income, watch every credit and deduction — this matters.

A phone answer from the CRA is not always correct

Ask for details, name and reference number and record your phone call with the CRA, if possible

• Don’t assume a CRA phone answer is “safe.” Even though the CRA is the authority, as the audit shows, there’s a chance the answer is wrong. So make sure you:

  • Ask for details: which rule or section, what conditions apply.

  • Get the agent’s name and reference number (if possible) and make notes. The news report last week suggested that you start recording your phone calls with the CRA going forward.

  • Document your question and their answer (write it down, keep time/date, etc).

• Use multiple resources. Don’t rely solely on a phone call.

  Check:

  • The CRA’s own published guides for that credit or deduction. Every tax season, I always take the time to read the CRA’s website if there’s a specific item that I’m not sure about.

  • A qualified tax preparer/accountant (especially for more complex items, such as owning your own business).

  • Trusted tax clinic if your situation is simple, but you want confirmation (good for someone on a single income).

• If you file based on advice and later you must pay back money, know you can ask for penalty/interest relief—but you’ll need to act. Don’t ignore it. This might include:

  • Filing your request within the 10-year window.

  • Showing you reasonably relied on CRA information.

• Budget for possible unexpected tax obligations. If you claimed something because you believed it applied, but it turns out it didn’t, you could owe back differences plus interest. That means for a one-income household where every dollar counts, it’s wise to hold a “reserve”. This is something that goes along with everyday life when you have one income. Always try to set aside some money for unexpected expenses.

• For simple households (like many one-income families raising children):

  • The most common credits/deductions are often clearly guided (child care, spousal amounts, RRSPs, etc). Phone calls can be fine — but make sure you verify.

  • For unusual or borderline claims (home-business portion, non-standard income, large lump sums), consider professional review.

I have to admit I was shocked when I heard this on the news. What other profession can you be wrong 83 percent of the time, and it’s okay? No problem. Just move on here. I can’t think of one. Imagine if you were a nurse and you were wrong with the care you gave your patients 83 percent of the time. Do you think you would still have a job?

Document your interactions

Make note of what was said on a phone call, along with writing down some of your own research about your taxes on the CRA website

So, be cautious, be prepared, document your interactions, verify things, and build your monthly or annual budget with enough margin to cover surprises. Especially when you're managing on one income, the more predictable your tax obligations are, the better.