Five Ways The Cra And Government Can Fix The Tax System And Get Rid Of Some January Blues

The mid-January blues are here … do you have them yet? If it helps to pull you out of them, here’s a gentle reminder that you have roughly 3.5 months to file your 2025 personal tax return. Awesome, eh?

You can start getting all your receipts and information together in a safe spot and get ready to give them to your tax preparer. Or, if you’re a do-it-yourselfer, you can start marking your calendar for the day you can buy the 2025 version of your tax software. It’s all exciting stuff.

Roughly one-third of Canadians pay a professional to prepare their taxes, but more than 60 per cent of returns are filed by someone other than the taxpayer , including paid preparers, volunteers or family members, according to Canada Revenue Agency (CRA) data. In other words, a majority don’t file their own return even if they don’t always pay for help.

The overlying message here is that preparing your tax return is not easy, even though it should be. The tiny Baltic country Estonia provides a good model for this. There are many credible reports that it takes the average Estonian three to five minutes to complete and file their tax returns. Wouldn’t that be a great goal to move towards in Canada?

Despite years of signalling that the government wants to introduce automatic tax filing for simple tax filers and lots of fanfare about it in the 2025 budget , I’ll believe it when I see it. Despite opposition from some groups, fully automatic tax filing for those with simple tax affairs should be available. But the system needs to provide for a true version of it, not one that waits for the consent of affected taxpayers .

Compound the above with the shortage of accountants . More than 220,000 chartered professional accountants form one of Canada’s largest professional bodies, yet the profession is under increasing strain. Employers across the country continue to report persistent challenges in attracting and retaining qualified accounting talent — a trend that’s particularly acute in public practice.

At the same time, many experienced practitioners are approaching retirement, and fewer young professionals appear to be pursuing careers in accounting. Combined with ever-growing compliance burdens and tax complexity, these pressures are converging into a capacity crisis that headline membership numbers don’t fully reveal.

To top it all off, the past three tax filing seasons were met with confusion and uncertainty. The trifecta started in 2023 with underused housing tax filings due for 2022. The legislation was poorly drafted and expansive, with non-compliance penalties starting at $5,000. It put tax filers into a very tough situation to try to ensure their clients complied.

In 2024, it was the trust reporting requirements that were due for year-end 2023, which included bare trusts. There was — and continues to be — significant confusion as to what a bare trust is for purposes of the filing requirements. At the very last minute, the filing requirements were suspended, but not after practitioners struggled mightily to ensure compliance. Bare trusts will need to start filing again for the 2026 year.

The third mess was last year’s filing requirement for capital gains, given the uncertainty of the inclusion rate increase proposals coming out of the 2024 federal budget. Such proposals were on life support at the beginning of 2025 for 2024 filings until late March 2025. The uncertainty was simply unnecessary and caused tax preparers fits when trying to figure out how to ensure proper compliance.

So far, it looks like a quadfecta will not be coming this year for 2025 filings. But, hey, there’s still 3.5 months left until the deadline, so let’s see what happens.

What’s the solution to all these challenges: expensive and difficult to file, lack of automatic filing, declining numbers of accountants and tax preparers and numerous tax filing debacles?

Here are five suggestions to make tax filing season easier for Canadians and their advisers .

Fast-track a real automatic filing system, not a half-measure . If Estonia can deliver a pre-filled return in five minutes, so can we, eventually. The CRA will need the legislative authority and technical commitment to move beyond limited poor pilots that enable filings without taxpayer consent. Such a system should provide for an opt-out, not an opt-in. There are numerous other technical issues, but let’s get at it.

Simplify the tax system . It’s not just the paperwork and technology that are broken; it’s the underlying complexity. Phase out ineffective tax credits, better align the rules and remove duplicative or unnecessary legislation (especially outright political tax measures). All this should occur with a comprehensive tax reform commitment by the government.

Launch a proper tax designation and pipeline strategy . It’s long past due to introduce a recognized tax specialist designation to differentiate those who actually know this stuff from those who dabble. Pair it with recruitment and education incentives to get more young professionals into the tax and accounting profession, especially in public practice.

Stop administering policy by press release . The capital gains debacle, underused housing tax issues, bare trust mess and, most recently, the digital services tax repeal all prove that policy needs to be much better vetted before legislation goes to Parliament. Recognizing policy problems after the law exists and dealing with them by press release changes causes chaos.

Invest in the tax infrastructure, not just CRA headcount . CRA’s staff has grown by nearly 50 per cent in the past decade, but service has arguably worsened. We need better systems, training and support, not just more bodies or lame 100-day plans .

Until we take the above seriously and take steps to fix the system, the mid-January blues will keep lasting well into May.

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Kim Moody, FCPA, FCA, TEP, is the founder of Moodys Tax/Moodys Private Client, a former chair of the Canadian Tax Foundation, former chair of the Society of Estate Practitioners (Canada) and has held many other leadership positions in the Canadian tax community. He can be reached at kgcm@kimgcmoody.com and his LinkedIn profile is https://www.linkedin.com/in/kimgcmoody.

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