Podcast: Automatic Tax Filing - Will It Work?

Last week Taxpayers' Ombudsperson François Boileau  tabled his annual report:  In Pursuit of Better Service: Taxpayers Deserve More.  once again, it was nothing short of scathing, as CRA received its highest number of complaints in the last three years.  Calling our “completely nuts” Income Tax Act a potential barrier, he is nonetheless pushing for automatic tax filing as a potential solution.  A new episode of Real Tax News with Evelyn Jacks & Friends available next week, will feature guest Gillian Petit, Ph.D. - author of a great report, Welcome News for Lower-Income Canadians, but There’s More to Do - which takes a deeper dive.  Consider the following:

The Backdrop.  According to the Ombudsman’s report taxpayers have had six major complaint triggers and they are significant:

Taxpayers could not access or regain access to their own CRA accounts needed to view critical tax documents and correspondence.

CRA Agents, when reached after excessive wait times, gave “incomplete, inaccurate or unclear” information.

Delays in processing tax information are completely unacceptable – exceeding CRA’s own services standards.  It is now taking close to a year – 50 weeks - to process “complex” T1 adjustments. The standard set by CRA is a still-too-long 20 weeks.

Collection actions have been too aggressive, not taking individual circumstances into account and in some cases pushing Canadians into financial hardship.

CRA’s Service Feedback program is a bust  - too many delays caused by an increase in complaints, which the complaint department can’t process either!

So is automatic tax filing the answer?  The federal government plans to launch a pilot project in fall 2026, with approximately one million Canadians invited to review and approve pre-filled tax returns beginning in March 2027. By March 2029, the program is expected to expand to approximately 5.5 million eligible individuals. The goal is straightforward: increase participation in the tax system among Canadians who do not currently file returns and, as a result, miss out on valuable government benefits.

According to research highlighted in the Real Tax News podcast, approximately 10–12% of Canadians do not file tax returns, with the non-filing rate rising to approximately 18% among lower-income Canadians. Since filing a tax return serves as the gateway to benefits such as the Canada Child Benefit, provincial support programs, the Canada Disability Benefit, and the new Canada Groceries and Essentials Benefit, failure to file can have significant financial consequences.  For example, the new Canada Groceries and Essentials Benefit alone could provide eligible families of four with up to $1,890 annually.

Discretionary Authority May be Given to CRA.  Automatic tax filing will take two streams, Dr. Petit explains.  Under the proposed system, the Canada Revenue Agency would have discretionary authority to prepare and file tax returns for certain eligible individuals. However, taxpayers would still need to review and approve the information within a limited timeframe through their CRA My Account portal. Given current service standards, this could set Canadians up for protracted grief with the CRA.

Consider that pre-filled returns rely on government-held information being accurate and up to date. Changes in marital status, income sources, or family circumstances could lead to incorrect benefit payments and, potentially, future repayment obligations.  Errors by third parties reporting information to the CRA can also be problematic.

Other Obstacles to Digitization.  Further, there are many Canadians without reliable internet access, digital literacy skills, familiarity with CRA's online systems or even banking access who will continue to face barriers to tax filing and receiving their benefits.

The discussion on automatic tax filing effectiveness also sheds light on the limited success of previous efforts to simplify filing. Although approximately three million Canadians were eligible

for CRA's SimpleFile service in 2026, fewer than 100,000 utilized the call-in option. This suggests that technology alone may not be sufficient to solve the problem of non-filing or the complexity within our tax system.

Other Countries Have Had Better Success.  Many other countries have successfully implemented automatic tax filing systems, notably Estonia, but often within simpler tax frameworks supported by extensive third-party reporting and streamlined benefit structures.

The Bottom Line.  Automatic tax filing is coming.  Done well, it could help millions of Canadians receive more of the refundable tax benefits they deserve. Done poorly, it risks creating new barriers for those it aims to support and further service complaints for Canada’s overwhelmed tax department. 

Its success, however, will depend on thoughtful implementation, robust safeguards and training at the CRA, and ensuring that the people most in need are not left behind by digital barriers. 

Perhaps most important, to make automatic tax filing work well, Canada needs to commit to a significant tax reform to simplify its taxation system.

To hear the full discussion, including insights into international best practices and recommendations for strengthening Canada's approach, listen to this episode of Real Tax News with Evelyn Jacks & Friends featuring Gillian Petit.