May 1 2013 CRA just called! They're stepping up with electronic tracking of T1ADJ's but we have to do our part!

In March, at a CRA/CGA liaison meeting at the Surrey TO, I commented that CRA was not respecting our cover letters for multi-family, multi-year adjustments.

One very wise CGA pointed out after the meeting, that CRA processes individuals, not families. We, as tax preparers process families. That's OK as long as it's the initial filing in April, as there's no cross checking done at that point, any cross checking takes place later during the post audit assessments, and by then everything should  line up in the credit apportionment game.

The problem is when you attempt to adjust tax returns for families for prior years, it's often 3 or 4 taxpayers, parents, grandparents, children with disabilities for ten years that need adjusting. So you send in adjustments where the credits or expenses are apportioned differently than when they were first filed. That's the problem, if everything isn't adjusted together, it will raise red flags. If I change one taxpayer, it trips a wire that says the other taxpayer claimed that, if the other taxpayer's adjustment hasn't been processed yet. CRA's method of handling that tripped wire wasn't to investigate. It turns out that was because they couldn't, because they couldn't find the other adjustment as they had no tracking system for T1ADJ's in process. Shades of the DTC application process back in 2005, when DTC's would vanish into CRA desks for years at a time.

Usually this problem is the result of a newly approved, backdated Disability Tax Credit, and soon, the Infirm Amount that isn't claimed yet (new for 2012). As a result, there are a whole bunch of other credits, expenses, etc. that can be apportioned differently, or amounts can be increased for new limits because of the DTC, for example, the child care amount increases to $10,000 from $7,000 or continues to be claimable for an adult child... or you can claim medical expenses you couldn't before, as there are four medical expenses you must have the DTC to claim the medical expense...you get my drift.

Anyway, CRA mail room had instructions to keep the cover letter with whichever T1ADJ was on top, and the other T1ADJ's were torn off and sent on their merry way. As a result, taxpayers would receive partial adjustments. It might take several more tries with new T1ADJ's to eventually get the whole adjustment processed correctly for the entire family.

It was pretty obvious, after the meeting, the management at CRA really didn't like being told they didn't respect our submissions. They did some investigating; and have determined, bless their hearts, have come up with a solution.

The solution? If they implemented an electronic tracking system for receipt of T1ADJ's, just maybe, if we were to cross reference our T1ADJ's they might be able to find the other adjustment to cross check and process the entire T1ADJ for everyone on the first go.

So we have to do our part to make this work. Instead of a cover letter, your first line on each T1ADJ in the explanation/information box should cross reference to the other connected or related or affiliated T1ADJ's for that year, with a statement that says:

THIS ADJUSTMENT DIRECTLY RELATES TO THE T1ADJ FOR "suzie Q" SIN #777777777
and list the multi-family members whose adjustments should all be considered together. Then, explain what you would have put on the cover letter right on the T1ADJ, and do that on each one.

Now that they have an electronic tracking system, at least in the Surrey Tax Office so far, and soon to be rolled out to other TO's across this fair land for the rest of you, just maybe we'll be able to stop this round robin and get on with doing what we should be doing, instead of re-doing T1ADJ's at least twice, if not three times. It's been known to take an entire year to adjust everything correctly.

I'm impressed. Someone has obviously taken this seriously and it just could work. 

And me, here's hoping they discover how to use electronic tracking devices with little GPS's in them next. That way, they could see inside the desks of those CRA staffers on 4 week holidays who have squirrelled away work for when they get back. What's with that? Take away those desks, make them work at tables and for heaven's sake, put the unfinished work back in the queue. Come back to a fresh start. That would be my answer.