Family tax cut: Revenue Canada officials told to 'stockpile' some claims till June

Some families hoping to cash in on the government's much-hyped family tax cut may have to put their spring spending spree on hold for a few months.

Reassessment requests won't be processed until proposed changes passed into law

The Canada Revenue Agency is advising tax officials to 'stockpile' reassessment requests related to the family tax cut until the proposal is officially passed into law later this year. (Evan Mitsui/CBC)

Some families hoping to cash in on the government's much-hyped family tax cut may have to put their spring spending spree on hold for a few months.

Those who claim the new tax credit on their 2014 return will get any benefit that's coming to them, but anyone who has already filed a return without making use of the income-splitting measure and wants to claim it retroactively will have to wait until the tax cut is formally approved by Parliament.

The Canada Revenue Agency said those who are eligible but haven't filed for the measure are only a fraction of a per cent of claimants so far.

The new measure allows two-parent families with at least one child under the age of 18 to transfer up to $50,000 of income from the higher-income spouse to a lower-earning partner. The tax cut takes the form of a non-refundable tax credit that can be claimed by either spouse, with a cap of $2,000.

According to an internal CRA memo obtained by CBC News, tax officials are being instructed not to process requests for tax reassessments claiming the new credit before the amendments to the tax code make it through Parliament even though they are proceeding as if the changes have been passed into law for those who claim the credit the first time around.

"Based on existing reassessment policy, we do not reassess a tax return that is correct under existing law for the purpose of allowing a proposed measure," the memo notes.

"As a result, we are not permitted to be pro-active on the requests until after the proposed measure receives royal assent, which will likely be in June 2015."

Agency confirms delay

The memo advises officials to "stockpile" reassessment requests until the agency informs that the tax cut has passed into law, "at which point the returns can be reviewed for a possible adjustment."

In the interim, it suggests taxpayers affected should be sent "a courtesy letter of explanation."

A spokesman for the Canada Revenue Agency confirmed that reassessment requests won't be processed until legislation to implement the changes is finalized.

"The Canada Revenue Agency has a longstanding practice of administering proposed tax changes in order to avoid public confusion and improve administrative efficiency," agency spokesman Philippe Brideau told CBC News. 

"At the same time, the CRA takes care to ensure that all public communications concerning proposed tax changes identify them as such until they are passed into law."

Brideau said the agency expects less than 0.01 per cent of those eligible to request a reassessment because they missed claiming the credit.

"To date, more than 99 per cent of those that have filed and are eligible have claimed the family tax cut," he said in a followup email.

It's not clear how long it will take the agency to process the requested changes once the new measures are in place.

Legislative limbo

The House gave its preliminary approval to the family tax cut last fall when it passed a ways and means motion that laid out the new measures in general terms.  

Rewriting the tax code, however, requires legislation, which likely means the new measures will be included in the omnibus budget implementation bill that will be tabled after Finance Minister Joe Oliver delivers his budget in April.

In the meantime, the legislative limbo hasn't stopped the government from promoting the promised tax cut. 

Shortly after the ways and means motion was passed last fall, the Finance Department began running radio ads touting the planned expansion of the universal child benefit, as well the proposal to allow limited income-splitting.

The new benefits were also featured prominently in an information kit distributed to MPs by the tax agency last month.

With files from CBC News and The Canadian Press