Taxpayers who claimed the lifetime capital gains exemption (LCGE) on their 2024 tax returns and were incorrectly assessed may be waiting several more weeks — a couple of months at least — for a reassessment.
On Sept. 9, Ryan Minor, director of tax with CPA Canada, published a LinkedIn post with a communication from the Canada Revenue Agency (CRA): “Based on current estimates, non-complex reassessments are expected to be completed within approximately 10 weeks, while complex reassessments may require up to 20 weeks for completion.”
On Monday, this publication requested an update from the CRA, which the agency said will come next week.
Earlier this year, the CRA said it had identified two unspecified issues causing incorrect assessments of some T1 tax returns claiming the LCGE. The agency said it resolved the issues on April 21 and May 22, respectively, and would proactively reassess affected returns beginning on June 10. However, an unspecified delay prolonged the process, the agency said in July. At that time, the CRA said it expected to begin the reassessments “shortly.”
When some affected clients still hadn’t received reassessments, CPA Canada members had asked for an update, Minor said in his post last week.
The CRA is working on the incorrectly assessed T1s, “but it seems to be slow,” Shane Schepens, a tax partner with Clearline CPA in Surrey, B.C., said in an interview.
Schepens said “a handful” of clients have been affected — for no obvious reason. “Back in April when we filed, it was hit or miss whether [clients claiming the LCGE] got assessed properly or not,” Schepens said.
One affected client had sold a business and was in the process of arranging a relatively large mortgage. “Obviously, the banks will confirm whether you have any outstanding liabilities, including a CRA liability,” Schepens said. Despite CPA Canada and the media raising awareness about the incorrectly assessed returns, “the bank still would not accept that as a valid reason to have an outstanding amount,” he said. The client “had to pay off that balance before the bank would actually go ahead and issue the financing.”
The CRA reassessed this particular client’s return last week, he said, and the client is getting a refund. The interest rate on non-corporate taxpayer overpayments is currently 5% (the interest is taxable to the taxpayer).
Schepens said he had recommended that affected clients file an objection with the CRA, “because there is a process for that,” whereas the process for the incorrectly assessed returns was less clear. Further, with an objection, the disputed amount doesn’t appear in an individual taxpayer’s CRA account as a balance owing, he noted.
However, most of his affected clients, including the one seeking a mortgage, didn’t want to incur the time and costs associated with an objection, he said.
The LCGE, available for gains on the sale of small business shares and farming and fishing property, increased to $1.25 million from $1,016,846, effective June 25, 2024 — the date the defunct proposed increase to the capital gains inclusion rate was originally slated to take effect.
T1 and T3 schedules maintained the reporting of capital gains before June 25 and after June 24 of last year in line with the proposal and LCGE increase.
On Friday, the CRA posted its 100-day service improvement plan, in response to Finance Minister François-Philippe Champagne setting that timeline earlier this month for the agency to fix its contact centre delays.