The 2024 tax season got off to a rocky start for many early filers, as the Canada Revenue Agency experienced a technical issue in processing the returns of Canadians who opened a first home savings account (FHSA) in 2023, The Globe and Mail has learned.
In recent days, several members of Canadian online communities on the social-media platform Reddit said they had been waiting for up to a month for tax refunds tied to contributions they had made to their FHSAs in 2023, despite filing their paperwork electronically.
The CRA said Thursday that the issue has been resolved. “The issue was identified immediately and the CRA worked diligently to resolve it as soon as possible,” Kim Thiffault, a spokesperson for the agency, said in a statement via e-mail. ”Canadians with an FHSA can now expect their notices of assessment within normal timeframes.”
FHSAs, which became available last year, are a new type of tax-advantaged account meant to help Canadians save for a down payment on their first home.
The CRA’s service standard for processing digitally submitted returns is two weeks, a goal the agency says it has consistently met more than 90 per cent of the time for the past several years.
But this tax season is the first one in which the agency is handling paperwork for the FHSA.
“As can sometimes be the case with new initiatives at the beginning of tax season, the CRA encountered some processing issues with tax returns that included information related to the First Home Savings Account (FHSA) opened during 2023,” Ms. Thiffault said.
Several Reddit users who had flagged the delay reported receiving notices on Thursday morning that their returns were being processed.
Some, however, are still waiting for an update. In Toronto, 29-year-old Semyon Khit said both he and his fiancée have FHSAs and experienced the delay. But while his partner had just received an express notice of assessment, his online CRA account still has no information about when his return will be processed three weeks after he filed.
Both Mr. Khit and his fiancée are each waiting for thousands of dollars’ worth of tax refunds tied to their FHSA contributions and other deductions, he said. They’re planning to buy a house soon and have been counting on that money to help cover land transfer taxes and other real estate transaction costs.
Any prolonged uncertainty about when his refund might land could hamper their house hunt, he said.
“Timing is really important,” he said, speaking of the need to move quickly in a hyper-competitive housing market.
The FHSA combines the main tax perks of the tax-free savings account (TFSA) and the registered retirement savings plan (RRSP). Money invested inside an FHSA grows tax-free, with qualifying withdrawals from the fund also exempt from tax, as with a TFSA, and deposits into the account eligible for a tax deduction as well, as is the case with RRSP contributions.
Canadians can deposit a total of up to $40,000 into an FHSA, with an annual limit of $8,000. Account holders can also carry forward any unused contribution room to the following year.
Taxpayers who opened an FHSA in 2023 can claim up to $8,000 worth of contributions made by the end of last year as a tax deduction on their tax return.
FHSA holders must report information about their account on their tax returns using a T4FHSA slip provided by their financial institution.
As of early December, 2023, more than 300,000 Canadians had opened an FHSA, according to CRA data.
Are you a young Canadian with money on your mind? To set yourself up for success and steer clear of costly mistakes, listen to our award-winning Stress Test podcast.
