Category: Domestic Tax

A July 25, 2025, Federal Court case found that CRA’s denial of penalty tax relief on excess TFSA contributions was reasonable. Due to the loss of value in the taxpayer’s TFSA, the taxpayer could not withdraw the full amount of his excess contribution. The taxpayer noted that without relief, his only means of reducing the overcontribution was to wait for annual TFSA limit increases, currently set at $7,000, which would require approximately 16 years for the ongoing tax to be fully eliminated. CRA found, and the Court agreed, that this situation provided no basis for relief. The Courts have ruled similarly in several other cases.

However, the Court stated that it shared the taxpayer’s concerns that, in certain circumstances, prolonged and ongoing liability and inability to remedy overcontributions appear to be inconsistent with the legislator’s intent. The Court stated that the legislation, as is, operates as a perpetual tax trap for taxpayers who made a good-faith but mistaken overcontribution, and even when they act to unwind it to the best of their ability, they cannot do so because the value of their TFSA is insufficient.

Prior to making TFSA contributions, check your available contribution room on the CRA My Account portal. Ensure to adjust the CRA-provided contribution room for factors that may not yet be reflected in CRA’s balance, such as contributions made since CRA’s last update.

A July 30, 2025, Tax Court of Canada case considered whether luxury clothing expenses claimed by a commissioned employee for the 2016 to 2018 taxation years were deductible against the individual’s employment income. The taxpayer worked as a sales associate for Holt Renfrew and argued that she was required, either expressly or implicitly, to incur clothing expenses to fulfill her employment duties. The taxpayer also argued that the clothes were only used in the work environment and were depleted quickly due to wear and tear, as well as changes in fashion. To deduct expenses related to commission income or the cost of supplies consumed in employment duties, employees must have received a T2200 and be required by contract to pay for their own expenses.

Taxpayer loses

The Court found that there was no explicit or implicit contractual obligation for the taxpayer to incur such expenses. The employer consistently denied requiring employees to buy any clothing in excess of what was covered by the employer-provided clothing allowance, but rather, only required that clothes worn be clean, fresh and coordinated. No T2200 form was issued as employees were not expected to bear personal costs for work-related clothing. The Court emphasized that, while the taxpayer believed that incurring those expenses helped the taxpayer generate more commission, a strategic and economic choice is not equivalent to a legal obligation under her employment terms. No deduction for clothing was permitted.

The Court also acknowledged that work clothes may be deductible in unique circumstances and noted that it may have been possible that the clothes were used up in a season or two due to wear, tear and changes in fashion. However, that angle was not relevant as the taxpayer lost on the aforementioned grounds, in addition to not providing sufficient support that the expenditures were incurred.

Ensure to only claim expenses against employment income if all conditions for deducting such an amount are met.

An August 25, 2025, Tax Court of Canada case considered whether a taxpayer’s relocation expenses in 2020 qualified as deductible moving expenses. The dispute focused on whether the distance between the old residence and the new work location was at least 40 km greater than the distance between the new residence and the new work location.

CRA calculated the difference as only 32.8 km using an “eastern route” proposed by Google Maps. The taxpayer, also using Google Maps, submitted route data showing an average difference of 47.4 km using a “western route.”

Taxpayer wins

The Court noted that, based on various other court cases, the measure and test should be evaluated based on the shortest normal route. The Court noted that technology like Google Maps is widely accepted and used, representing an updated method and the new norm to identify the shortest normal route. This was supported by the fact that both the taxpayer and CRA used Google Maps to determine the appropriate route.

The Court then examined the parameters that CRA and the taxpayer used to obtain their respective Google Map results. It noted that the CRA agent, located in a different time zone than the taxpayer, had generated route estimates based on traffic at approximately 7:45 pm, rather than the taxpayer’s actual commuting time of 4:45 pm. The taxpayer demonstrated that in four out of five weekdays, at 4:45 pm, Google Maps suggested the route resulting in a 47.4 km difference. The Court noted that the updated utilization of computer algorithms, when properly deployed, renders consistent sets of data to determine whether a move is an eligible relocation or not.

The Court agreed with the taxpayer, concluding that the average daily travel distance saved by the move exceeded 40 km and therefore, the relocation qualified.

If claiming a moving expense, document how the “shortest normal route” was calculated. Include details on which tool was used and the parameters entered.

The most recent Canada Post strike commenced on September 25, 2025. Shortly after, CRA provided an update on the impact, including the following guidance:

• taxpayers are still responsible for meeting their tax obligations, and are encouraged to file or remit electronically;
• communications regarding audits, objections, appeals, disputes, or relief requests will continue by telephone and digital services (e.g. online CRA accounts or the Secure drop zone), but written letters will be limited to exceptional circumstances; and
• penalty and interest relief may be granted to those who cannot meet their tax obligations due to circumstances beyond their control.

CRA will continue to update their Canada Post mail service disruption – Impact on CRA services webpage with the latest information.

On September 29, 2025, Service Canada stated that delays will occur in respect of cheques mailed for Canada disability benefits and employment insurance benefits. CPP and OAS cheques will be delivered, but may be delivered prior to the date on which they can be deposited. They also encouraged the submission of online applications for various programs and registering for direct deposit. They noted that decision letters and other mail-outs for many programs will be affected by the strike.

Consider signing up for direct deposit if you have not already done so.

TOPICS COVERED IN THIS ISSUE INCLUDE:

• Personal Measures
• Business Measures
• International Measures
• Sales and Excise Measures
• Other Measures
• Previously Announced Measures

Since January 1, 2024, most remittances or payments to the Receiver General (e.g. GST/HST and income tax) in amounts exceeding $10,000 have been required to be made by electronic payment unless the payer or remitter cannot reasonably do so. A penalty of $100 can apply for each failure.

In June 2025, CRA advised CPA Canada that they will not currently enforce these penalties and will give advance notice if this changes. Meanwhile, it will focus on educating and encouraging taxpayers to make electronic payments, including those made through banks, credit unions, online banking, CRA portals, or third-party providers.

Although CRA is not currently assessing penalties, taxpayers should consider switching to electronic payments now to avoid surprises if/ when enforcement begins.

An April 29, 2025, French Federal Court case reviewed the taxpayer’s application for judicial review of CRA’s denial of a waiver of interest and penalty taxes on her excess TFSA contributions for the 2021 and 2022 taxation years (1%/month during which the excess contributions remained in the TFSA).

On July 26, 2022, CRA issued a notice of assessment outlining the excess contributions, which was delivered to the taxpayer’s online CRA account. The taxpayer, unaware of this communication, discovered the excess contribution in February 2023, when she logged in to her online CRA My Account to apply for employment insurance sickness benefits. She withdrew the excess within days.

The taxpayer argued that she had forgotten that she had changed her communication preferences from paper to electronic and, given her lack of technological expertise, she had not linked her email address with her online CRA account to receive the notifications.

CRA denied the relief, asserting that the excess must be withdrawn “without delay” for discretionary relief to be considered. Without delay has been defined administratively by CRA as a period of 30 days following the time that the individual is informed of the excess contribution. CRA asserted that this was the date that the assessment was posted electronically (July 26, 2022). As the amount was withdrawn more than 6 months after this time (February 2023), CRA’s position was that the amount was not withdrawn without delay.

Taxpayer loses

The Court found CRA’s denial reasonable, emphasizing that taxpayers who opt for electronic communication and neglect to check their account regularly cannot complain that they are unaware of CRA communications. In addition, CRA is not required to demonstrate that a taxpayer received mail; CRA must only demonstrate that the mail was posted.

If receiving electronic-only CRA communications, ensure to provide CRA your email address to get notifications and check the portal regularly.

In a May 1, 2025, French Federal Court of Appeal (FCA) case, the Court considered whether a taxable benefit was conferred on the transfer of real property from a corporation to its shareholder.

In 2013, a corporation owned equally (50/50) by the taxpayer and her spouse transferred a building worth $430,000 to them. CRA reassessed the taxpayer to include a taxable benefit for her portion of the building’s value ($215,000).

Taxpayer loses

Although the taxpayer argued that she had provided consideration by assuming three mortgages on the building, the Tax Court of Canada (TCC) found that she had not assumed the obligations personally. The taxpayer also argued that the benefit should be negated because she resold the building to the corporation for $1 in 2017. The FCA noted that no provision in the Income Tax Act retroactively nullifies a taxable benefit due to a subsequent transaction. As such, the FCA upheld the TCC decision that there was a taxable benefit.

If transferring assets out of the corporation, talk to a professional to determine the tax consequences and what supporting documents should be retained.

Government-issued cheques never expire, so they can be cashed at any time. If they have been lost or damaged, they can be replaced at the taxpayer’s request. To find uncashed cheques for individuals, taxpayers should go to their online CRA account (My Account) and select “Uncashed Cheques” on the “Overview” page or the “Accounts and Payments” page. If an uncashed cheque is listed, taxpayers may download, print, and submit the pre-filled form (Form PWGSC 535, Undertaking and Indemnity) to request that the cheque be replaced.

A May 12, 2025, National Post article (CRA looking for the owner of 160 cheques worth over $100K. Could it be you?, Christopher Nardi) noted that there were over ten million uncashed cheques, worth approximately $1.7 billion. While the vast majority are under $1,000, the article indicated that nearly 190,000 are larger, with 160 exceeding $100,000. These cheques date back as far as 1998.

Check your CRA My Account to see if you have any uncashed cheques from CRA.