Double Click
E-File Expansion
More tax professionals could be taking advantage of the electronic filing services offered by the CCRA.
FROM:
JAN-FEB 2003 ISSUE | BY
GEORGE ARSENIJEVIC
As part of Canada's Government On-Line initiative, the
Canada Customs and Revenue Agency (CCRA) plans to offer greater electronic service delivery by 2005, including bundling electronic services. Part of this plan is to offer more online information to clients who already file their tax returns electronically.
Electronic filing services provide people with one-stop service and
self-serve options beyond traditional hours of operation. The CCRA is working on building the capability to process
70 per cent of all individual income tax returns electronically within the next few years. However, the use of electronic services is dependent on the quality of the service and attitudes toward Internet transactions.
Tax professionals play a vital role in the success of the CCRA's electronic filing services, EFILE and
EFILE On-Line. But the benefits are mutual. For example, recent research shows that, although Canadians know they can file their income tax returns electronically on their own, they still prefer to have a tax professional electronically file their returns for them. The EFILE and
EFILE On-Line services provide the opportunity to gain an electronic advantage as a tax preparer in Canada.
Right now, more than 14,000 Canadian tax professionals electronically file more than
six million income tax and benefit returns on behalf of their clients. Add to this figure the number of
self-prepared returns and you will discover that almost
nine million returns were filed electronically during the last income tax filing season. That's
39 per cent of all individual tax returns filed in Canada, still a far cry from the CCRA's goal of
70 per cent.
The number of computer-generated paper returns continues to grow every year. Almost seven million returns were prepared on computers but were not electronically transmitted. And tax professionals prepared nearly half of them. The time it takes to process paper returns creates delays in clients receiving their assessments and adds to the CCRA's processing costs. A goal for the department is to ensure that these
computer-generated returns are filed electronically. One way to reach this goal is by enhancing the services to benefit tax professionals.
A Client-Driven Service
The CCRA has been expanding its electronic services since the idea for such a service took hold more than
14 years ago. EFILE was launched nationally
in 1993, and,
in 1995, the CCRA introduced the electronic data interchange format with transmission through a
value-added network.
In 2000, with the introduction of NETFILE, allowing individuals to transmit their returns over the Internet using commercial software, pressure to offer an Internet channel for tax professionals increased. The
EFILE On-Line service was piloted
in 2001 as "NETFILE for Tax Professionals."
NETFILE for Tax Professionals allowed tax preparers to submit single returns that were processed in
real-time with acknowledgment of receipt transmitted from the CCRA within seconds. By using the Internet service, tax preparers no longer had to arrange for transmission testing, encryption software, or to sign on with a transmitter or a
value-added network. While almost
700 tax preparation firms registered to use the service, interest was lower than anticipated.
The CCRA recognized that tax professionals would be reluctant to switch to its online service unless it offered all the functionality of traditional EFILE, including a batch processing option, which allows for the simultaneous transmission of multiple returns. Tax professionals also made it very clear that they wanted to retain the name EFILE since NETFILE was associated with the service for self-preparers.
EFILE On-Line Enhancements
The CCRA responded last year by changing the name from NETFILE for Tax Professionals to
EFILE On-Line and enhancing the service to allow Tax Professionals to make name, address and direct deposit changes, and to indicate whether or not they wanted to receive CCRA contact letters. The updated Web site provides complete instructions and has a direct link for tax professionals to provide comments about the new service. Almost
5,000 professionals signed up for the 2002 tax season, which contributed to the dramatic increase in the number of electronically filed returns. Recently,
EFILE On-Line introduced a batch processing option to simultaneously transmit multiple returns, which means
EFILE On-Line now provides even more to tax professionals than the traditional EFILE service.
Since December 2002, the CCRA has also been offering a new real-time System of Electronic Notification of Debt (SEND) service to all authorized electronic filers using
EFILE On-Line, provided they have the appropriate client authorization on file. SEND is a service that tax preparers who discount income tax refunds use to identify outstanding debts. Various enhancements have been introduced into the online SEND service, such as information about the Home Buyer's Plan (HBP) participation. Before filing the client's return, many professionals will appreciate knowing of any outstanding balances, the need to repay a student loan or participation in
the HBP.
Why E-file?
Currently, more than
70 per cent of returns filed by tax professionals in Canada are filed electronically. The goal this year is to entice those professionals who prepared returns on computers, then printed them out, to file electronically. But what stops these tax professionals from taking the next electronic step?
Some tax professionals have resisted electronic filing because of the costs and complexity of the traditional EFILE service. The
EFILE On-Line enhancements this year will provide a viable alternative. Others have resisted because they do not want to deal with contact letters from the CCRA, especially those that request receipts. Last year, tax professionals had the option of allowing clients to be contacted directly. Dealing with client receipts or contact letters from the CCRA does not compromise the benefits of the service. Less than
four per cent of EFILE returns are reviewed for elements that may require a review of receipts and even fewer result in contact.
Some professionals worry about security and privacy issues. The CCRA Web site uses the most secure form of encryption commonly available in
North America. Still others believe there is a greater chance of being audited; however, the selection criteria for validation reviews are the same for paper and electronic returns.
Future Directions for E-Filing
Over the years, the CCRA has introduced several changes to improve the electronic filing process for tax professionals. It simplified the application process, streamlined suitability screening and reduced the number of review letters. However, if the enhancements fail to encourage tax professionals to use the
EFILE On-Line service, it may need to consider alternatives to remain in line with its goals.
In the meantime, as part of its Government
On-Line commitments, the CCRA is working on bundling electronic services so that clients who are currently filing returns electronically can benefit from the opportunity to review their information and eventually make changes online. Soon the CCRA will provide taxpayers with access to their RRSP room, the status of their return, the expected refund, basic tax account balances and benefits information from the CCRA's Web site through a "My Account" feature. Information of this nature will also eventually become available to authorized tax professionals using
EFILE On-Line, allowing them to play a greater role in becoming their clients' tax agent.
The CCRA welcomes comments and feedback.
E-mail your ideas to
EFILE_comments@ccra-adrc.gc.ca. Visit the CCRA Web site at
www.ccra-adrc.gc.ca.
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George Arsenijevic, B.Comm., CGA, is the director general of the Individual Returns and Payments Processing Directorate at the Canada Customs and Revenue Agency.
"Double Click" is co-ordinated by
John W. Yu, M.Sc., CDP, FCGA. Yu has been in the
IT industry since 1970 in a broad range of roles in technology and in management. He is currently
vice-president, Information Technology, at
CGA-Canada.