Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA. Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Principal Issues: Treatment of an income tax refund.
Position: Not a source of income.
Reasons: The law.
Author: Cooke, Michael
Section: 164(1), 164(1.5) and 164(7)
May 12, 2016
Re: Enquiry submitted to the Income Tax Rulings Directorate
Thank you for your correspondence of March 24, 2016 and your subsequent correspondence that we received on May 4, 2016. It is our general understanding that as a result of a key punching error made by the Canada Revenue Agency you received an income tax refund for the 2014 tax year in excess of the amount to which you were otherwise entitled.
We do not consider an overpayment of income tax (i.e., a tax refund) to be a source of income. Accordingly, a taxpayer is not required to report an overpayment of income tax (even one made in error) as income when it is received. However, where the amount refunded to a taxpayer includes interest relating to the overpayment, such interest would be reported as income by the taxpayer.
In your particular situation, we understand that the income tax refund was received by you in 2015. This amount, including any part of the amount that you have to repay to the government, would not have to be reported on your personal income tax return for 2015 or any other tax year.
We also understand that your particular situation is currently being considered by local Canada Revenue Agency officials. Consequently, we are unable to provide any further comments with respect to your file.
We trust our comments about income tax refunds will be of assistance.
Michael Cooke, C.P.A., C.A.
Business Income and Capital Transaction Section
Business and Employment Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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