The judge in this case had no choice but to dismiss the appeal of the non-resident taxpayer who had unknowingly made the mistake of not filing returns in Canada and electing to have their Canadian income not be counted as taxable. This story is another example of how easy it is to make a mistake and get caught up in the tax machine even where legislators probably didn’t intend it. If you are assessed for tax and don’t know if you should appeal, contact ZheroTax for a free assessment by former CRA auditors, appeals, and rulings officers (and other tax professionals) to determine if an appeal can be successful. Even if you don’t have a case for a successful appeal, these experienced former CRA officers can help make payment arrangements with the CRA that are fair and reasonable given the financial circumstances of the taxpayer.

From the court record for the case:

[1] The circumstances surrounding this appeal are extremely unfortunate. At the end of these reasons, I will make some comments about these circumstances and I would urge the parties to carefully consider them.

[2] I would also suggest policy makers seriously consider the possibility of amendments regarding when elections must be made under section 217 of the Income Tax Act.

[4] The Appellant is a retired teacher who resided in Canada until 11 October 2011. He moved to the United States and became a non-resident of Canada.

[5] In May and June 2016, respectively, the Minister of National revenue wrote to the Appellant regarding unfiled T1 returns for the years 2011 to 2014 inclusive.

[7] In July 2016 the Appellant filed T1 tax returns for all the years in issue and he filed them in the same way as if he had still been a resident. His income consisted of superannuation benefits and in the 2015 taxation year only some RRSP income.

[9] In February 2018, the Minister issued failure to remit assessments for Part XIII non-resident withholding tax with respect to the five years in issue.

[15] The purpose of section 217 of the Income Tax Act is to put certain non-resident individuals in a position where they are generally no worse off than if they were still residents.

[16] Given the Appellant’s income sources, had he made a timely election to benefit from the alternative provided for in section 217 of the Income Tax Act, he would have avoided having to pay the additional withholding amounts levied. This result stems from the fact that, generally, this alternative allows a taxpayer to keep the usual deductions.

[18] Unfortunately, section 217 required that the Appellant file a Part I tax return within six months of the end of the year and elect in that return to have section 217 apply for the tax year.

The legislation reads as follows:

“In this section, a non-resident person’s “Canadian benefits” for a taxation year is the total of all amounts each of which is an amount paid or credited in the year and in respect of which tax under this Part would, but for this section, be payable by the person because of any of paragraphs 212(1)(h), (j) to (m) and (q).

(2) No tax is payable under this Part in respect of a non-resident person’s Canadian benefits for a taxation year if the person

(a) files with the Minister, within 6 months after the end of the year, a return of income under Part I for the year; and

(b) elects in the return to have this section apply for the year.”

[22] I now turn to evidence that the Appellant gave in relation to the many difficulties that he had in obtaining information on how to proceed together with arguments he raised based on the Taxpayer Bill of Rights.

[23] I accept the Appellant’s evidence that he had great difficulties in obtaining information, that there were delays and that the information was not always helpful.

[24] However, notwithstanding its name, the Taxpayer Bill of Rights is not a law and does not give rise to legal rights. It is more in the nature of an aspirational document and it would probably be better if the document were given a different name.

[28] While the Appellant appears to be in an extremely difficult situation given the amount owing in relation to his income, it is not something that I can consider for the purposes of the determination that I must make.

[29] However, with respect to hardship, there are provisions which allow the Minister to waive interest and penalties in certain circumstances—see subsection 220(3.1) of the Income Tax Act. I am pleased to note that the Minister proactively waived interest for a certain period because of delays that took place earlier.

[30] The Appellant can certainly make a request to the CRA for further relief under that provision. This court has no jurisdiction with respect to such matters.

[32] Before concluding, I wish to observe that, given the objectives of section 217, it is surprising that there is no possibility of electing section 217 any later than June 30 of the following calendar year.

[33] The Appellant fits very well into the profile of the kind of taxpayer whom section 217 was intended to benefit.

[34] In this case losing the ability to make such an election had a dramatic negative effect on the Appellant.

[35] The withholdings already made by the payors of the Appellant’s pension payments and RRSP payment were sufficient to cover all the Appellant’s income tax had he been able to take advantage of section 217. At no time would the public purse have been out of pocket.

[39] Policymakers and Parliament may wish to consider whether there should be amendments to give a longer period for making an election under section 217 or whether the Minister should have the ability to extend the time.