EFILE: What do the tax authorities actually receive when you transmit?

The EFile program, offered by both the Federal and Quebec governments, has allowed tax preparers to transmit electronically their clients’ tax returns in an efficient manner. Considering how many years the program has been around, most tax preparers take for granted what they transmit to the CRA and RQ. But what does the CRA and RQ actually see when you transmit the tax return? Let’s find out…

Visible Fields

Throughout the tax return, you will notice what I would refer to as “visible fields”, i.e. EFile fields you can spot by simply looking at the forms. These are the lines numbers that are shown to the left of any field of the official forms. For example, on the T1, lines 101 and 104 are what would be considered as visible fields. On Schedule 1, lines 300 and 301 are visible fields. It’s the same logic concept for Quebec. All these fields get transmitted to their respective governments.

However, some forms that have visible fields also have some important fields that are not transmitted. For example, on the T2125, many of the expense fields have line numbers to the left of them.  Nevertheless, not all expense items have line numbers to the left of the fields. Home office and vehicle expenses, for example, are items for which no field numbers are provided for the itemized expenses, such as fuel and maintenance costs for vehicles.  The total amount of these itemized expenses is transmitted to the CRA, but no details of the itemized expenses. In contrast, for Quebec, all of these itemized expenses are transmitted.

The moral of the story is this: for the grand majority of amounts that are transmitted to the government (especially the CRA), a line number has to be on the left of the field. If no line number is shown to the left, that amount does not get transmitted.

Hidden Fields

When you transmit a tax return to the CRA and RQ, not only do the visible fields transmit, but also certain other fields, what I would call “hidden” fields. These fields do not appear on any government form, but they are transmitted by tax software such as DT Max. For example, when your client has no net income to declare on his/her tax return, DT Max will prompt you to enter the keyword NO-INCOME to be able to transmit. Why? Because of a hidden field, 9915, which has to be included in the transmission. When you transmit the tax return, many hidden fields go with the transmission. These hidden fields can be crucial when determining how to resolve an error code received by the government. The CRA will specify the hidden field in the error code to help you resolve the issue. Where do you have access to these hidden fields? See the “Return Record” section below.

Non-Transmittable Forms

There are some forms within a client’s tax return that are not transmitted, even if the return itself is eligible for transmission. For example, the T2091, Designation of a Property as a Principal Residence, is a form that is not transmitted. How can you see which forms are not transmitted? One clue, on the federal side, is to go back to what was mentioned above, and see if you see lines numbers to the left of the fields. In the case of the T2091, you will notice that no line number is shown on the left of the fields on this form.  Nevertheless, the most authoritative way to get to the answer to this question is to consult the “Return record” form produced by DT Max (see the “Return Record” section below).

Multiple Entries for One Claim

In many entries of the tax return, you might be required to enter multiple items for the same claim. For example, you might have multiple receipts for medical expenses and donations, or multiple stock transactions.  For these specific examples, only the cumulative amount that your client will claim will actually be visible to the government when you transmit. The CRA and Revenu Québec do not see the itemized receipts for medical and donations, and do not see the multitude of stock transactions when you transmit your client’s tax return. Therefore, you can shorten the entry time you dedicate for these entries and simply enter the cumulative amount of the receipts or transactions in tax software such as DT Max. This approach would be recommended if you have a separate method of logging these itemized amounts, such a spreadsheet that keeps track of stock transactions for your client. Remember that during an audit, you will be required to produce a schedule that shows these itemized amounts.

Return Record

In every tax return you produce using DT Max that is eligible for efiling, the program will produce for you a form called the “Federal - Return Record” (for Quebec returns, you will also have “Quebec – Return Record”) . Within that form, DT Max indicates to you the actual fields that get transmitted to the CRA and, if applicable, to Revenu Québec. This form is the authoritative form produced by the software to show you what actually gets sent to the CRA and to RQ if applicable. When you receive an error code, this is the first form you should consult in order to resolve your error messages. This is also the only form that will show you the hidden fields that are transmitted (see section “Hidden Fields” above), which might be the cause of your error code.