ARCHIVED - Ombudsperson's Final Update - Getting it Right (2012)

Background

The report was produced as a result of our Office’s examination into why payments being made by taxpayers to the Canada Revenue Agency (CRA) were not applied to the intended account.

At the time, our Office received complaints of the CRA assessing interest and penalty charges, as well as tasking collection officers to collect payments on accounts where taxpayers indicated they had already paid.

To understand the issues further, our Office focused the examination on the impact the misallocation had on taxpayers and the challenges the CRA faced allocating a payment to the correct account.

Our Office’s research revealed the following:

• The CRA’s internal transcript forms used for remittances were not being filled out properly.
• The CRA’s payment processing procedures allowed for batches up to 250, but smaller batches improved speed and accuracy.
• The CRA’s 24-hour payment processing deposit mandate had a negative impact on the efficiency of payment processing.
• Taxpayers made errors when making payments.

To address the findings, the Taxpayers’ Ombudsperson recommended the CRA:

1. Review its standards and procedures for processing payments to ensure clerks are afforded sufficient time to perform their duties with accuracy and efficiency.
2. Determine the optimal payment batch size for the detection and correction of errors.
3. Inform and educate taxpayers on how to avoid making remittance errors and how to have them corrected when they do occur.

The CRA agreed to implement the recommendations and provided an action plan outlining how it intended to address them.

Update

Since the report was published, the CRA has provided updates to our Office demonstrating how it is following through with the recommendations; this is examined below. 

Processing payments

The CRA is now processing the vast majority of payments through automation, which has likely lowered keying errors. However, the CRA still manually processes some payments it receives, and in 2017 it indicated it accepts a keying error rate of 2%. Keying errors could lead to some misallocation; however, the CRA indicated it is not possible to track misallocated payments. That said, automating payment processing, along with other digital approaches may help to limit payment misallocation, and ensure the correct payment is directed to the intended account.

Time clerks are afforded to process payments

In our Office’s examination we found the CRA’s 24-hour deposit mandate, negatively impacted the speed and accuracy of the payments being processed. The Taxpayers’ Ombudsperson recommended the CRA review its standards and procedures for processing payments to ensure its clerks have enough time to perform their tasks efficiently and accurately.

The CRA informed our Office that it originally doubled its standard for processing payments to 48 hours which it determined was not sufficient; but that changing it to 72 hours outside of the T1 tax filing season, and 96 hours within the T1 tax filing season allowed for the effective processing of payments.

Optimal batch size

Our Office also found the CRA’s flexibility in processing payment batches as high as 250 negatively impacted the speed and accuracy of the payments being processed. This lead to the CRA conducting a pilot project which determined a batch size of 100 made it easier for its clerks to detect and correct errors.

Our Office is encouraged to see the CRA has taken steps to process payments more effectively, and while it does not eliminate misallocations, it has likely had a positive effect.

Taxpayer guidance

Our Office’s research also found misallocations occurred when taxpayers made errors. Further, we found the CRA failed to educate taxpayers on how to prevent the errors from happening, which ultimately could lead to repeated errors being made. In the report our Office stressed how the CRA has a duty to provide the information taxpayers need to fulfil their obligations in Canada’s self-assessment tax system.

The notable change the CRA carried out to educate taxpayers was made to its Payments to the Canada Revenue Agency webpage.^{Footnote 1} The Income tax package for 2019^{Footnote 2} also directs readers to this webpage when they need more information on making payments to the CRA.

The webpage includes two sections, “Make a payment” and “Confirm your payment”.

1. “Make a payment” informs visitors on how to make a payment to the CRA to the intended account. The webpage is intuitive and immediately separates individuals from businesses and the type of payment the visitor is wanting to make. Once the visitor makes their selections, they are provided with an information page directing the visitor on how to make a payment with the method of their choice.
2. “Confirm your payment” informs visitors on how to verify a payment has been applied to the intended account and directs visitors to the CRA’s My Account and My Business Account.

In addition, the CRA’s My Account and My Business Account have seen many improvements. The new “Proceed to Pay” button was added to provide clients with a convenient way to make their payment to the CRA within the portals. This feature was introduced to expand the current payment options as well as reduce misallocated payments by allowing the user to make a payment with their information pre-populated in real time (such as their current amount owing, and period end). The webpages detail to users what is owing to the CRA, for which account, and how to make a payment to the account. We are encouraged to see the CRA has been constantly improving how taxpayers can allocate payments to accounts. By the CRA incorporating direct payments through the CRA’s My Account and My Business Account misallocations have likely been reduced, as the payment would be allocated to the account displaying the balance.

That said, while users have access to account balances, there remains, a delay between when a payment is made and when it is applied to the account, much like when paying bills to other organizations. The CRA does; however, provide good guidance to taxpayers when it issues Notice of Assessments explaining that payments take time to be applied to accounts.

Conclusion

The key issue in the initial examination were payments being made to the CRA were misallocated — meaning the payments were not applied to the intended account. The report was produced as a result of our Office’s examination into payment allocation at the CRA and recommended the CRA take specific actions.

The CRA has addressed the recommendations and has shown its commitment to reducing errors and improving the guidance available to taxpayers on making payments. There are still further improvements the CRA can make, considering the misallocation of payments to, and within, the CRA continues to be an issue; however, these would go beyond the scope of the recommendations made in this report.

Further, our Office has received very few complaints regarding the misallocation of payments, likely because the CRA indicates it is a straightforward correction that can be done at the call centre. However, while the correction of a misallocation can be straightforward it should be prevented at the source; whether it be prevented from within the CRA, or through educating taxpayers on how to make a payment to an account.

The Taxpayers’ Ombudsperson finds that the CRA has taken appropriate steps to address the recommendations in the Getting it Right report. It is recommended no further action be taken by our Office at this time; however, we will continue to monitor the complaints we receive as well as outreach and media reports.