Guide for Discounters

Available electronically only

T4163(E) Rev. 11

If you have a visual impairment, you can get our publications in braille, large print, etext (CD), or MP3. For more information, go to our About multiple formats page or call 1-800-959-2221.

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Table of contents

• Is this guide for you?
  • Electronic filing (EFILE) of client returns
• What's new?
• Chapter 1 - General information
  • What is a discounter?
  • What is the Tax Rebate Discounting Act?
  • Who is responsible for administering the Tax Rebate Discounting Act?
• Chapter 2 - How do you become a discounter?
  • Who can apply?
  • How do you apply?
  • When is a new application necessary?
  • Discounter Direct Deposit Enrolment
  • Form RC76, Application and Agreement to Obtain a Discounter Code / Discounter Direct Deposit Enrolment
  • Discounter codes - Terms and conditions
  • Refund Set-Off program
  • Family Orders and Agreements Enforcement Assistance (FOAEA) Program
• Chapter 3 - Forms and documents
  • Form RC71, Statement of Discounting Transaction
  • Form RC72, Notice of the Actual Amount of the Refund of Tax
  • Notice of assessment or notice of reassessment
  • Auditing discounters' records
• Chapter 4 - General guidelines
  • Acquiring the right to a refund
  • What if the actual refund is less than the estimated refund?
  • Client debts
  • Completing a client's return
  • Requesting adjustments
  • Discounter code on a client's return
  • Fraudulent discounted returns
  • Authorization to represent your client
• For more information
  • Our service complaint process
  • Your opinion counts

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Is this guide for you?

If you offer a tax discounting service to your clients, this guide provides you with information about how the Canada Revenue Agency administers the Tax Rebate Discounting Act, which regulates the practice of tax discounting.

In this publication, we use the acronym "CRA" to represent the Canada Revenue Agency.

Electronic filing (EFILE) of client returns

EFILE is a system that allows registered tax preparers to send current year individual tax returns to us, using one of our two methods of electronic transmission:

• EFILE-online - allows you to transmit your clients' returns individually over the Internet. You get an acknowledgement receipt of the individual return instantly.
• EFILE online Plus - allows you to transmit from 1 to 30 of your clients' returns at one time over the Internet. When you send a batch of returns, the acknowledgement file takes only a few hours. You may also obtain, almost instantly, selected information about your clients' account from the System for the Electronic Notification of Debt (SEND).

We recommend that you use EFILE to file your clients’ returns. Since EFILE eliminates several manual processing steps, we can process most electronic returns in about two weeks. It is the fastest way to file returns and get your clients’ refunds.

For more information on EFILE and SEND, go to EFILE or contact the EFILE Helpdesk at your tax centre. You can find more information on SEND on System for Electronic Notification of Debt (SEND).

What's new?

Chapter 1 - General information

What is a discounter?

Discounters prepare tax returns and provide their clients with an immediate discounted tax refund before filing the returns.

Discounters keep part of the expected refund as a fee and pay the rest immediately to their clients. Fees charged are limited by the Tax Rebate Discounting Act.

What is the Tax Rebate Discounting Act?

The Tax Rebate Discounting Act regulates the practice of tax discounting. Its purpose is to protect the rights and interests of individuals who use discounting services to get their income tax refunds.

Subsection 2(1) defines the term "client" to mean a person from whom a discounter acquires a right to a refund of tax to which that person is entitled. The term "client" used in this guide and on the forms relating to discounters also has the same meaning.

The Tax Rebate Discounting Act requires that you, as a discounter, pay the client (at the time the discounting transaction took place) at least:

• 85% of the estimated refund, if it is $300 or less; or
• $255 plus 95% of the amount over $300, if the estimated refund is more than $300.

The discount includes any fees that you, or another person or company acting for you, may charge for preparing the client's return or for any other service related to the discounting transaction.

Discounters who pay their clients less than the above-mentioned amounts are guilty of an offence.

A payment to an individual, under a remission order whose purpose it is to provide relief from tax, is not a refund of tax. It cannot be discounted.

Who is responsible for administering the Tax Rebate Discounting Act?

The Tax Rebate Discounting Act is a federal act that the CRA administers. Manitoba administers corresponding provincial laws governing discounting. In Quebec, it is illegal to discount refunds of Quebec provincial income tax.

Manitoba

The Manitoba Department of Finance administers the regulations governing discounting under the Manitoba Income Tax Act. You need proof of provincial registration before we can register you as a new discounter.

Before you start discounting activities in Manitoba, you have to comply with the provincial statutes governing matters such as registration and approval of forms. The prescribed annual registration fee is $1,000 plus $200 for each additional discounting location and must be submitted with your annual registration form.

Income tax returns prepared by discounters are subject to the 7% Manitoba retail sales tax (RST). For more information, see Retail sales tax (RST). Manitoba discounters must be in good standing with the Province of Manitoba in order to maintain their discounter code with the Canada Revenue Agency.

For more information, go to Tax Rebate Discounting in Manitoba or contact:

Tax Rebate Discounting Administrator
Manitoba Tax Assistance Office
Manitoba Department of Finance
Room 809, 386 Broadway
Winnipeg MB  R3C 3R6

Telephone:	204-948-2115
	1-800-782-0771

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Chapter 2 - How do you become a discounter?

Who can apply?

All firms, organizations, and financial institutions that want to provide discounting services to members of the public or to their own clientele can apply.

All applications are subject to a review process to ensure the reliability of tax discounters.

We do not issue or reissue a code to a discounter who does not co-operate with us to ensure that the Tax Rebate Discounting Act, the Regulations, and the administrative procedures are followed. We will suspend or cancel a code because of a discounter's continuous non-compliance, refusal to co-operate or failure to meet the EFILE screening criteria published on the CRA Web site. For more information, go to Suitability screening.

Note
Before applying to obtain a discounter code, you are required to obtain an EFILE number.

How do you apply?

To get a discounter code, you have to complete and send us Form RC76, Application and Agreement to Obtain a Discounter Code / Discounter Direct Deposit Enrolment. This is a one-time application, unless any of the information given on your original application changes. You will have to file a revised application if, for example, your mailing address or other details change. To determine when a new application is required, see When is a new application necessary?.

If your firm, organization, or financial institution has more than one location, each location has to file a separate form. For example, if you have one head office and four branch offices, you have to complete and file five applications. The permanent mailing address for all locations is the same (head office address), but each location has a different operating address.

We will only issue you a discounter code if your application is complete. You must read and understand the Discounter codes - Terms and conditions of this guide, and then sign and date the agreement at the bottom of Form RC76. An application may take up to 30 days to process. Once we process and accept your application, we will give you an eight-digit discounter code. If you have more than six locations, we may issue you a series of codes. See For more information for their address and phone number.

A discounter code is not transferrable to any other person or company.

Please note that we will deactivate any code that is not used for two consecutive years. Contact the Represent a Client and Discounter Services Section to re-activate the code.

When is a new application necessary?

If your business has undergone one or more of these changes, you must submit a new application:

• name of proprietorship, partnership, or corporation;
• business number;
• business type;
• discounter’s name or legal name of company;
• a business is sold;
• a business’s organizational structure, partnership composition, or controlling interest changes; or
• branch sites or managing offices are added.

For more information, contact the Represent a Client and Discounter Services Section.

Discounter Direct Deposit Enrolment

You can have discounted refunds deposited directly to your account at any financial institution in Canada.

If you use direct deposit, we will send two copies of the client's notice of assessment to your permanent mailing address. Keep the copy in your files and give the original to the client.

If you wish to start using direct deposit or to change the direct deposit banking information we already have on file for your discounter code, you have to complete Parts A to D and Parts J to M of Form RC76. You must file a separate form for each of your discounter codes.

If you are requesting a change to direct deposit banking information we already have on file for your discounter code, do not close your old account before we start depositing payments into your new account.

Form RC76, Application and Agreement to Obtain a Discounter Code / Discounter Direct Deposit Enrolment

Each of the following steps corresponds to a section on Form RC76. It is important to complete all sections of this form. Attach a separate page if you need more space to give information or to explain something.

Part A:

Tick the appropriate box to let us know if this is a first request for a discounter code or if you are changing information previously sent to us.

Part B:

If you were previously assigned a discounter code, enter the discounter code that we assigned to you.

Part C:

Discounter's name as it will appear in box 1 on Form RC71 - The name does not have to be the official name or registered name of your business. You can use up to 30 characters for this information. You may have to abbreviate your company name.

Part D:

Permanent mailing address - Enter the address where you want us to send correspondence, notices of assessment, and cheques. If you have more than one discounting location with the same mailing address, you may want to include a branch or identification number as part of your discounter's name in Part C. The permanent address you give on this form has to be identical to the address you will show on each Form RC71, Statement of Discounting Transaction, which you will file with all discounted returns.

Note
If your permanent mailing address has changed, make sure to complete a new Form RC76 and send it to the Represent a Client and Discounter Services Section. If you fail to do so, your notices of assessment or cheques could be sent to an incorrect mailing address.

Discounting operation address - Enter the address where the discounting operation takes place. We will not issue a discounter code if you do not complete this section.

Telephone number(s) - Enter the telephone number(s) where you can be reached during usual business hours on a year-round basis.

Complete Parts A to D and Parts J to M if this form is only being used for direct deposit enrolment.

Part E:

Discounter's name or legal name of company - Enter the official name or registered name of your business.

EFILE number - If you are an electronic filer, or were an electronic filer in a previous year, enter the EFILE number assigned to you by the EFILE helpdesk.

Business number - Include the Business Number of the company or proprietorship.

Part F:

Language - Tell us in which official language you want us to communicate with you.

Part G:

Name(s) and Social insurance number(s) - Enter the names and social insurance numbers of all proprietors, branch managers, partners, directors, officers, controlling shareholders and any persons having management and control of any of the applicants (for example, a district or regional manager). Attach a separate page if you need more space.

Note
All names listed on the EFILE application must be the same names identified in this part.

Part H:

Type of business - Indicate the type of business you are operating.

Part I:

Certification and Agreement

You must read, understand, sign, and date this part of Form RC76.

Note
It is mandatory that you read and understand the following terms and conditions before you sign Form RC76.

Discounter codes - Terms and conditions

As a discounter, it is your obligation to comply with all provisions of the Tax Rebate Discounting Act, the most current version of the CRA procedures and policies contained in this guide and the Information for discounters’ web page on the CRA website at Information for discounters. To keep informed of the latest information, go to our web page on a regular basis, but in any event no less often than quarterly.

We issue discounter codes if all of the following conditions are met:

• the discounter meets the suitability screening criteria. The criteria for discounters are the same as for electronic filers. For more information, go to Suitability screening;
• the discounter acknowledges having read , understood, and has agreed to be bound by the requirements and obligations set out in this Guide and the Information for discounters web page on the CRA website by signing the Certification and Agreement on the front of Form RC76;
• the discounter gives us all telephone numbers where the discounter can be reached year-round during regular business hours;
• the discounter agrees to notify us in writing within 15 days if any of the information entered on Form RC76 changes;
• the discounter agrees to use authorized forms for each discounting transaction;
• the discounter gets a code for each location at which the discounter operates;
• the discounter fills in Part G of the Form RC76 application with the names and social insurance numbers of all proprietors, branch managers, partners, directors, officers, controlling shareholders and any persons having management and control of any of the applicants (if more space is required, attach a separate sheet of paper);
• the discounter pays any fines and restitution to victims and fulfills any probation terms a court orders for any previous convictions under the Tax Rebate Discounting Act before the discounter can receive a discounter code; and
• the discounter complies with any discounter registration requirements of a province or territory in Canada.

We suspend or cancel discounter codes under the following conditions:

• the discounter does not meet or continue to meet the electronic filers suitability screening criteria;
• we have reasonable grounds to believe that a discounter has not complied with any of the provisions of the Tax Rebate Discounting Act or with any term or condition outlined in this section;
• the discounter does not reply within a reasonable time to our requests for information about discounting activities;
• a court judgment against a discounter forbids the discounter from operating for a specified period;
• outstanding matters relating to any or all codes assigned to the discounter, franchise, or company agent are not resolved to our satisfaction;
• the discounter has not paid fines and restitution to victims, and has not fulfilled the probation terms a court ordered for a previous conviction under the Act;
• the discounter has used discounter codes for any purpose other than discounting; or
• the discounter has not complied with any law of a province or territory of Canada that relates to discounting;
• we have reasonable grounds to believe that the discounter has committed an offence under subsection 239(2.21) of the Income Tax Act.

If we suspend or cancel the code, we will notify, by registered mail, the discounter and the headquarters of any franchise or agent office associated with the discounter. We will suspend from the system, without notice, any code that was not used during the last two tax years.

Discounter Direct Deposit Enrolment Request

Part J:

Tick the appropriate box to let us know if this is a first request for direct deposit or if you are changing information previously sent to us.

Part K:

Complete the banking information boxes and attach a voided personalized cheque or deposit slip to confirm the banking information, otherwise the enrolment request will not be accepted.

Part L:

There are two direct deposit options available: consolidated payments and individual payments.

• Consolidated payments option - If you choose this option, refund amounts from all tax returns that you discounted and that are included in the same processing cycle are credited to your banking account in one total amount.
• Individual payments option - If you did not choose the option above, each client's refund is credited to your account as a separate payment.

Part M:

You must read, understand, sign, and date this part of Form RC76. The enrolment request will not be accepted if this part is not completed.

System for the Electronic Notification of Debt (SEND)

SEND, available through the EFILE online Plus electronic transmission method, allows authorized tax preparers and discounters to submit their requests one at a time and receive, almost instantly, selected information about a client's account before filing the income tax and benefit return.

For the 2011 tax year, SEND will show if:

• the client qualifies for the Disability amount for the current tax year;
• the client may be entitled to the transfer of the Disability amount from his or her spouse or common law partner for the current tax year;
• the client may be entitled to the transfer of the Disability amount from one or more of his or her dependant(s) for the current tax year;
• the client has one or more of the past 10 prior year tax returns that could still be filed;
• the client’s prior year Notice of Assessment indicated there was a tuition, education, and textbook carry forward amounts available for the current tax year. Note that any subsequent assessments or reassessments may have affected that amount and that these carry forward amounts can only be claimed on the client's income tax and benefit return if the client has tax payable;
• the client is a Home Buyers' Plan participant and may be required to make a repayment for the current tax year;
• the client participates in the Lifelong Learning Plan and may be required to make a repayment for the current tax year;
• the client received social assistance or workers' compensation benefits (T5007);
• the client received Employment Insurance and other benefits (T4E);
• the client received Universal Child Care benefits (RC62);
• the CRA reassessed one or more of the client's prior-year tax returns between January 1, of the current tax year, and the time the SEND request was submitted;
• the client has a "client-requested reassessment" in progress;
• the client has a debt owing to the CRA and whether the debt is more or less than $10;
• the CRA or any other federal, provincial, or territorial government department, agency, or Crown corporation has a claim against any refund to which the client may be entitled, and will identify the source of any such claim;
• the client does not show in the CRA's records;
• the client has already filed a return for the tax year;
• the CRA's records indicate that the client is bankrupt;
• information on the client's account has previously been requested by another electronic filer through SEND since December 12, 2011;
• the client received Working Income Tax Benefits (RC 210).

SEND is not designed to give exact amounts owed to the CRA or to any other federal, provincial, or territorial government department, agency, or Crown corporation programs, or as a means to verify the income sources of any client.

If you need the telephone number for the federal, provincial, or territorial government department, agency, or Crown corporation that has a prior claim to your client's refund, call us at 1-800-959-8281.

Note:
The information provided in the SEND response is based on our records at the time the request is processed. Balances may change between the time the SEND request is processed and the time the tax return is processed. These balances will affect the refund amount. We are not responsible for errors or omissions in the information, or for providing any additional information about the client’s debt status.

For each SEND request submitted, you must get a signed Form T1153, Consent and Request Form, from your client. We monitor the activities of electronic filers to ensure that they comply with this and other requirements. If an electronic filer does not comply, we will issue warning letters as required and may suspend EFILE and SEND privileges.

To apply for SEND, you must use the EFILE online registration option by going to EFILE.

If your firm or organization has more than one location, each location must register separately.

An application may take up to 30 days to process. To give us enough time to review your application before the SEND season starts, we encourage you to register before November 11.

Existing EFILE online or EFILE online Plus users may renew their annual participation online over the Internet using their EFILE number and password.

For more information on SEND or EFILE, go to EFILE or contact the EFILE Helpdesk at your tax centre. A list of tax centres is available by going to EFILE and clicking on the Support tab on the left side of the screen.

Refund Set-Off program

The Refund Set-Off (RSO) program is a CRA initiative under which tax refunds of individuals are applied against unrecoverable Crown debts. Any federal, provincial, or territorial department, agency, or Crown corporation (called partners) may participate in this program subject to the CRA's policy and requirements, and other obligations.

Under the RSO program, a taxpayer's income tax refunds, goods and services tax/harmonized sales tax (GST/HST) credits, and Saskatchewan Low-Income Tax Credits (SLITC) can be used to "set-off" debts registered by the partners. A client's refundable provincial and territorial tax credits from participating provincial and territorial partners can also be used to set-off debts to other partners participating in the program.

New debts may be updated on a client's account at any given time. There is usually a one-time grace period to allow the client time to pay the debt. This grace period begins when an account is first added to the set-off database, and during this time we will not process a set-off. Each partner determines the length of its grace period, which may vary from partner to partner.

There is no grace period for amounts owing to the CRA, such as individual income tax debts or overpayments of federal social benefits and their provincial and territorial equivalents.

Family Orders and Agreements Enforcement Assistance (FOAEA) Program

The FOAEA Program provides for garnishing amounts owing to a spouse who sought legal assistance to obtain family support payments. When a client's (the debtor's) account has been flagged as FOAEA, the CRA will direct any funds requested by the Department of Justice Canada to that department, which will in turn remit the funds to the responsible provincial or territorial authority for distribution to the "creditor spouse."

Under the FOAEA Program, all or part of individuals' tax refunds may be diverted to the Department of Justice Canada to pay debts owed.

The Department of Justice Canada is responsible for determining who should be flagged for FOAEA activity, and they advise the CRA accordingly. Note that accounts may become flagged for FOAEA at any time, as directed by the Department of Justice Canada, and no grace period is provided.

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Chapter 3 - Forms and documents

For each discounting transaction, you must complete the following forms:

• Form RC71, Statement of Discounting Transaction; and
• Form RC72, Notice of the Actual Amount of the Refund of Tax.

To avoid delays and prevent refund cheques from being sent to the clients, make sure you use the proper forms and that they are complete, signed, and legible. Original forms are required; a faxed copy is not considered an original form. You must keep these forms for three years.

Since we revise our publications and forms periodically, make sure you use the latest versions. You can get these forms by going to Forms and publications or by calling 1-800-959-2221.

If you use a software package to prepare and transmit returns by EFILE, the software package may produce the discounting forms required. Make sure that the electronic forms include all of the information shown on the front and back of our paper forms.

Form RC71, Statement of Discounting Transaction

Form RC71 provides details of each discounting transaction. There are three copies of the form to be distributed as follows:

• Copy 1 is the CRA's copy. Attach copy 1 to the client's return if you file a paper return. If you use EFILE, keep copy 1 in case we ask to see it. Original signatures of the client and the discounter are required on copy 1.
• Give copy 2 to the client. The client and the discounter must sign it.
• Keep copy 3 in your files. This is optional. If you retain only copy 1 in your files, you are responsible for making a copy for your files prior to giving copy 1 to us if we request it.

Note
If you file your client's return or request adjustments on paper, we suggest that you attach copy 1 (the yellow copy) of Form RC71 instead of a software-generated or printed copy of the form.

If you use tax preparation software to prepare your client’s return, and you file your client’s return on paper, complete the electronic copy of Form RC71 before printing the return. The electronic version of Form RC71 must be an exact copy of the paper version of Form RC71 which has been signed and dated by the discounter and the client.

Electronic filing (EFILE) of discounted returns

If you use EFILE to file discounted returns, the information you enter on the electronic version of Form RC71, which you send with the client's return, should be the same as the information you enter on the paper version of the form.

In other words, the electronic version of the Form RC71 transmitted to the CRA must be an exact copy of the paper version of the Form RC71 which has been signed and dated by the discounter and the client.

Some discrepancies may occur between the two versions. The following situations are the most likely to occur:

• The estimated refund is reduced by a debt to be collected by the CRA. Some tax preparation software packages automatically transcribe the calculated refund, from line 484 of the client's tax return, to box A of Form RC71. If the client has a debt to be collected by the CRA, the refund shown on line 484 should be reduced by that amount. You must enter the actual amount to be discounted in box A of the electronic version of Form RC71.
• The date in box 14 is different from the date on the electronic version of Form RC71. This can happen when you prepare the EFILE return on a date that is different from the date you print Form RC71. Make sure that the date on the electronic version is the same as the date on the paper version of Form RC71.

You may have to manually override and lock these fields in your software before electronically transmitting the form to us to ensure the EFILE version matches the paper version.

How to complete Form RC71

When completing Form RC71, make sure that all copies, including your file copy, are legible and that you enter the correct figures in the appropriate boxes. Each of the following steps corresponds to a section of Form RC71.

The discounter and the client must sign and date the copy of Form RC71 provided to the client, the copy filed with the paper return, and the copy you keep on the client's file. You must give the client a copy of the back of the form.

Enter the tax year of the return being discounted in the top right corner of the form.

Discounter identification

Box 1 - Discounter's name

Enter the discounter’s name as it was shown in Part C on Form RC76, Application and Agreement to Obtain a Discounter Code / Discounter Direct Deposit Enrolment.

Box 2 - Discounter code

Enter the eight-digit discounter code issued to you. The code must be the one issued to the actual discounting location.

If applicable, the code on the electronic version must be the same code shown on the paper version.

Box 3 - Permanent mailing address

Enter your permanent mailing address as shown on Form RC76.Do not enter any temporary address you may have.

Box 4 - Proprietor's name

Enter the name of the proprietor, franchise owner, operator, manager, or agent at the permanent mailing address who is responsible for carrying out the discounting transaction at any temporary location. This must be the name of an individual, not the name of the business.

Box 5 - Telephone number

Enter the area code and the telephone number at your business address where your client can reach the management of the discounting operation during usual business hours on a year-round basis. If a client has no telephone number, enter 000 0000 and have the client initial this information.

Client identification

Box 6 - Client's name

Enter the client's name as it appears on his or her tax return, first name and initial followed by last name.

Box 7 - Social insurance number

Enter the client's social insurance number.

Box 8 - Address

Enter the client’s full mailing address. Give us the client’s address at the time of filing the tax return. The address must not be that of the discounter. You should explain to your clients that they should give you their correct address to ensure they receive their copy of Form RC72, Notice of the Actual Amount of the Refund of Tax, and their notice of assessment or notice of reassessment. You may also need to locate them if they become entitled to any additional amount.

Box 9 - Telephone number

Enter the client's telephone number. If a client has no telephone number, enter 000-0000 and have the client initial this information.

Box A - Estimated refund amount

Enter the estimated refund from line 484 of the client's return. If the client has an amount owing that is to be collected by the CRA, enter the amount from line 484 minus the amount owing. See the section called Client debts. If applicable, make sure the amount in box A of the electronic version of Form RC71 is the same as the amount shown in box A of the paper version of the form.

You must discount the full estimated refund amount, you cannot discount on a portion of this amount.

Box B - Minimum amount to be paid to the client by the discounter

On or before the date of the discounting transaction, you must pay the client the minimum amount. If you pay the client by a cheque, it must be dated and given to the client no later than the day of the discounting transaction. This amount has to be at least:

• 85% of the estimated refund, if it is $300 or less; or
• $255 plus 95% of the amount over $300, if the estimated refund is more than $300.

Enter the following amounts on the corresponding lines in box B of Form RC71:

Box C - Amount owed to the client by the discounter

Enter the amount you owe the client. The payment could be greater than the amount in box B on line iii) if you choose to pay more than the minimum amount required.

Note
The amount entered in box C is the amount before the calculation of any goods and services tax/harmonized sales tax/provincial sales tax or retail sales tax shown in box D.

Box D - Goods and services tax (GST), harmonized sales tax (HST), provincial sales tax (PST), or retail sales tax (RST)

Some clients may choose to pay the GST, HST, PST, or RST in cash, while others will ask that the tax be subtracted from their refund. In either case, the amount in box C must be the amount you owe to the client before you deduct the GST, HST, PST, or RST.

Goods and services tax (GST)

The GST rate is 5%.

You must collect from your clients the GST on the amount deemed to be consideration for a taxable supply of a service. The amount that is subject to GST is whichever is less:

• 2/3 × (the estimated refund minus the amount you pay to the client); or
• $30.

The maximum GST that can be charged on a discounting transaction is $1.50. If the estimated refund minus the amount you pay to the client is $45 or more, enter $1.50 on the GST line of box D.

If the estimated refund minus the amount you pay to the client is less than $45, multiply 2/3 of the difference by 0.05. Enter the result on the GST line of box D.

Harmonized sales tax (HST)

Nova Scotia, New Brunswick, Ontario, British Columbia, and Newfoundland and Labrador have harmonized their provincial retail sales tax with the GST. The combined tax is called the Harmonized Sales Tax (HST).

The HST rate varies by province - 12% in British Columbia, 13% in New Brunswick, Ontario, and Newfoundland and Labrador, and 15% in Nova Scotia.

You must collect from your clients the HST on the amount deemed to be consideration for a taxable supply of a service. The amount that is subject to HST is whichever is less:

• 2/3 × (the estimated refund minus the amount you pay to the client); or
• $30.

The maximum HST that can be charged on a discounting transaction in British Columbia is $3.60. If the estimated refund minus the amount you pay to the client is $45 or more, enter $3.60 on the HST line of box D.

If the estimated refund minus the amount you pay to the client is less than $45, multiply 2/3 of the difference by 0.12. Enter the result on the HST line of box D.

The maximum HST that can be charged on a discounting transaction in New Brunswick, Ontario, and Newfoundland and Labrador is $3.90. If the estimated refund minus the amount you pay to the client is $45 or more, enter $3.90 on the HST line of box D.

If the estimated refund minus the amount you pay to the client is less than $45, multiply 2/3 of the difference by 0.13. Enter the result on the HST line of box D.

The maximum HST that can be charged on a discounting transaction in Nova Scotia is $4.50. If the estimated refund minus the amount you pay to the client is $45 or more, enter $4.50 on the HST line of box D.

If the estimated refund minus the amount you pay to the client is less than $45, multiply 2/3 of the difference by 0.15. Enter the result on the HST line of box D.

Note
A person who provides financial services by means of discounting income tax refunds and who is considered to be a discounter for purposes of the Tax Rebate Discounting Act is considered to be a financial institution for GST/HST purposes. As a result, tax discounters are required to follow the special rules provided for financial institutions for GST/HST purposes, including the requirement to complete Form GST111 - Financial Institution GST/HST Annual Information Return if the financial institution is a GST/HST registrant and its total annual revenue is more than $1 million. For more information about Form GST111, see Guide RC4419, Financial Institution GST/HST Annual Information Return .

For more information on tax discounters and their GST/HST entitlements and obligations, see, GST/HST Memorandum 17.10, Tax Discounters , or contact us at 1-800-959-5525.

In Quebec, contact the Revenu Quebec, which is responsible for administering the GST in that province.

Provincial sales tax (PST)

In Prince Edward Island (PEI), Quebec, and Saskatchewan, PST applies to discounting services. Discounters in all provinces should check with their provincial revenue or finance department regarding legislative changes, such as those announced in a budget, which could result in changes to provincial tax rates and in how these apply to discounting services.

PEI sales tax - In Prince Edward Island, PST applies to accounting services, which include tax return preparation. The PEI sales tax rate is 10% and is applied to the GST-included price of tax return preparation services.

The maximum PEI sales tax that can be charged on a discounting transaction is $3.15, because the maximum a discounter can charge for preparing a tax return is $30.

If the estimated refund minus the amount you pay to the client is $45 or more, enter $3.15 on the PST line of box D.

If the estimated refund minus the amount you pay to the client is less than $45, use the following formula to calculate the PEI sales tax:

2/3 × (the estimated refund minus the amount you pay to the client) plus the GST charged on the transaction, multiplied by 0.10.

Quebec sales tax (QST)  - The QST rate is 8.5% and is applied on the GST-included price of discounting services. Please refer to the What's new? section of this guide.

The maximum QST that can be charged on a discounting transaction is $2.68. If the estimated refund minus the amount you pay to the client is $45 or more, enter $2.68 on the PST line of box D.

If the estimated refund minus the amount you pay to the client is less than $45, use the following formula to calculate the QST:

2/3 × (the estimated refund minus the amount you pay to the client) plus the GST charged on the transaction, multiplied by 0.085.

Saskatchewan sales tax - The Saskatchewan sales tax rate is 5% and is applied before the GST is added.

The maximum PST that can be charged on a discounting transaction is $1.50.

If the estimated refund minus the amount you pay to the client is $45 or more, enter $1.50 on the PST line of box D.

If the estimated refund minus the amount you pay to the client is less than $45, use the following formula to calculate the Saskatchewan sales tax:

2/3 × (the estimated refund minus the amount you pay to the client) multiplied by 0.05.

Retail sales tax (RST)

In Manitoba, RST applies to discounting services. Discounters in Manitoba should check with the provincial finance department regarding legislative changes, such as those announced in a budget, that could result in changes to provincial tax rates and in how these apply to discounting services.

Manitoba retail sales tax - The Manitoba RST rate is 7% and is applied before the GST is added.

The maximum RST that can be charged on a discounting transaction is $2.10.

If the estimated refund minus the amount you pay to the client is $45 or more, enter $2.10 on the RST line of box D.

If the estimated refund minus the amount you pay to the client is less than $45, use the following formula to calculate the Manitoba retail sales tax:

2/3 × (the estimated refund minus the amount you pay to the client) multiplied by 0.07.

Box E - Amount payable to the client

Enter the amount you owe the client from box C minus the total taxes owing in box D.

Box F - Cost to the client of the discounting transaction

The cost to the client of the discounting transaction is called the discount. It is the estimated refund minus the amount owed to the client before taxes (box A minus box C).

The discount must not be more than 15% of the first $300 of the estimated refund, plus 5% on the remaining amount.

Box 10 - Discounter's signature

This must be your signature, or the signature of a person you authorized to carry out the discounting transaction.

Box 11 - Discounter's name

Print the name of the person who signed in box 10.

Box 12 - Location

Enter the name of the municipality where the discounting transaction took place.

Box 13 - Date

Enter the date on which you or an authorized person acquired the right to the refund and paid the minimum amount.

Box 14 - Date

Enter the date the client signs Form RC71. The date on the paper and electronic versions of Form RC71 must be the same and must be the date on which you paid the client.

Line 15 - Client's signature

This must be the client's signature. Do not ask the client to sign until you pay the required amount and give the client a copy of Form RC71. Unless you have a valid power of attorney authorizing someone else to act on your client's behalf, the RC71 must be signed by the client. A client's signature on this line is not considered a proof of payment.

Line 16 - Client's name

The client must print his or her full name in this box.

Line 17 - Location

Enter the name of the municipality where the discounting transaction took place.

What if the client provides new information before his or her tax return is filed?

If the client provides new information that changes his or her return before it is filed, you will have to prepare another Form RC71 to discount this additional information and pay the client. The amount in Box A must reflect only the additional refund amount. However, you have to consider the initial discounted refund when you calculate the discount on the additional refund, since they are both for the same tax year. If the initial discounted refund was $300 or more, you must pay the client 95% of the additional refund. When electronically filing Form RC71, ensure that you transmit the total of the two RC71 forms and to keep them on file for your records.

Form RC72, Notice of the Actual Amount of the Refund of Tax

You have to inform the client of the actual amount of the refund you received from the CRA using Form RC72 as soon as you receive the notice of assessment. If the actual refund, minus any refund interest, is greater than the estimated refund by $10 or more, you have to pay this amount to the client within 30 days of receiving the refund.

If you have made all reasonable efforts, but cannot locate and pay the client within 30 days, you must return the excess amount to the tax centre within 30 days of receiving the refund. Make your cheque payable to the Receiver General for Canada. Include copy 1 of Form RC72 and write the client's name on the back of the cheque. Do not write the client's social insurance number on the cheque. If the client's copy of Form RC72 is returned to you by the post office, keep it in your files in case the client asks for it at a later date and as proof of your attempt to provide the form to your client.

If, after returning an excess amount to us, you locate the client or the client contacts you, tell the client to call our individual income tax enquiries at 1-800-959-8281.

Purpose of Form RC72

Form RC72 is used to notify the client of the actual amount of the refund and to help us process excess amounts. Complete this form as soon as you receive a notice of assessment or notice of reassessment, refund cheque, or payment. You have to complete this form for every return you discounted, regardless of the amount of the refund or the difference between the actual and estimated refund. You are required to send Form RC72 to all your clients regardless if there is an excess, a loss or a nil balance.

Form RC72 has three copies to be distributed as follows:

• Copy 1 is the CRA's copy. Send copy 1 to the CRA when you cannot pay the client any excess amount and you are sending the CRA a cheque made payable to the Receiver General for Canada. If you are not sending an excess to the CRA, keep copy 1 in case we ask to see it. If you use software to prepare these forms, an electronic copy rather than a paper copy can be kept. All information on the electronic copy, including the date in Box 10, must be identical to copy 2 (the copy that is given to the client).
• Give copy 2 to the client to notify him or her of the actual amount of the refund you received and any excess.
• Keep copy 3 in your files. This is optional. If you use software to prepare these forms, an electronic copy rather than a paper copy can be kept. All information on the electronic copy, including the date in Box 10, must be identical to copy 2 (the copy that is given to the client).

Excess payments held in trust

Any excess refund owing to the client is considered to be held in trust for the client by you until you pay the client or return it to us. You should inform your financial institution that you will be holding funds in trust from time to time. The institution may have specific requirements for handling trust funds.

How to complete Form RC72

When completing Form RC72, make sure that all copies, including your file copy, are legible. Each of the following steps corresponds to a section on Form RC72.

Box 1 - Client's name

Enter the client's name exactly as shown in box 6 of Form RC71.

Box 2 - Social insurance number

Enter the client's social insurance number as shown in box 7 of Form RC71.

Box 3 - Discounter code

Enter the eight-digit discounter code issued to you for the actual discounting location where the transaction took place. The code must be the same as shown on the paper version and, if applicable, the electronically filed version of Form RC71.

Box 4 - Client's address

Enter the client's address as shown in box 8 of Form RC71, or the new address if the client has moved.

Box 5 - Tax year

Enter the tax year of the discounted return.

Box 6 - Discounter's name

Enter your name as shown in box 1 of Form RC71.

Box 7 - Discounter's permanent mailing address

Enter your permanent mailing address as shown in box 3 of Form RC71, or the new address if your business has moved.

Box A

Enter the actual amount of the refund received from the Receiver General for Canada.

Box B

Enter the estimated refund from box A of Form RC71.

Note
Complete boxes C, D, and E only if the actual refund is more than the estimated refund.

Box C

Enter the difference between the amount in box A and the amount in box B. This is the difference between the actual and the estimated refund.

Box D

Enter the amount of the refund interest as shown on the notice of assessment or notice of reassessment. In most circumstances, you are allowed to keep the refund interest.

Box E

Enter the difference between the amount in box C and the amount in box D. If this amount is $10 or more, you have to pay it to the client. If the amount is less than $10, you can keep it or pay it to the client.

Box 8 - Discounter's signature

This must be your signature, or the signature of a person you authorized to carry out the discounting transaction.

Box 9 - Discounter's name

Print the name of the person who signed in box 8.

Box 10 - Date

Enter the date you or your representative signed this form, paid the excess to the client if applicable, and sent a copy to the client with the blue copy of the notice of assessment.

Box 11 - Location

Enter the name of the municipality where you or your representative signed this form.

What if you receive an additional refund?

After you have received the first refund and sent the required Form RC72 to the client, you may receive an additional refund amount or a notice of reassessment.

In such cases, you have to file a new Form RC72.

If the additional refund amount results because you filed additional information, complete Form RC72 in the usual way.

Enter the amount of the additional refund in box A. Enter, in box B, the additional estimated refund from box A of Form RC71 that was filed with the reassessment request.

Notice of assessment or notice of reassessment

You have to give the original notice of assessment or notice of reassessment including the Form RC72 to the client as soon as you receive it. You have to keep a copy of the notice, along with all other discounting documents, in your files for three years.

The notice of assessment and any information related to the assessment of discounted returns is provided to you for the sole purpose of administering the Tax Rebate Discounting Act. Any discounter who uses a client's notice of assessment or any related information for any other purposes is guilty of an offence and may be charged under subsection 239(2.21) of the Income Tax Act.

Auditing discounters records

We may ask you to provide documents or proofs of payment to make sure that you are following all the requirements of the Tax Rebate Discounting Act. We may make this request in writing, by telephone, or by visiting your place of business. We may also contact your clients to make sure they are receiving the payments and information to which they are entitled.

You have to send Form RC71, Statement of Discounting Transaction, and Form RC72, Notice of the Actual Amount of the Refund of Tax, proof of payment and any other documents requested to the Represent a Client and Discounter Services Section within the time frame we indicate. Do not send the forms to the provincial administrator, a tax services office, or a tax centre. You are responsible for the cost of sending the documents to us. If you have more than one discounter code, sort the forms in alphabetical order, by discounter code number, before sending them to us. Send original forms -- we do not accept photocopies. Do not fold the forms.

Proof of payment

If you pay your clients in cash, ask them to sign and date a receipt for the amount received. All information provided on the receipt must be typed. The receipt must indicate the amount and purpose of the payment and it must be signed and dated by the client. Such a receipt is your proof of payment.

If you pay your clients by cheque, the cancelled cheques they endorse are your proof of payment. We will also accept cheque images (front and back), if legible, provided by financial institutions. We will not accept banking statements as proof of payment. If you know a cancelled cheque will not be returned by the bank, as in the case of a certified cheque, your clients must show that they received the money owed to them by signing and dating standard business receipts. The receipts must be fully typewritten, including the dollar amounts. There must be space for your clients to sign and date the receipts to certify that the information on the receipts is correct.

Record-keeping requirements and destruction of records

You must keep records of all discounting transactions for three years after they took place. You are responsible for disposing of all documents properly to protect your clients' confidentiality.

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Chapter 4 - General guidelines

Acquiring the right to a refund

You must pay the client the minimum amount in box B on line iii) of Form RC71 before you ask him or her to sign this form or any other form that would give you the right to get a refund.

However, you can get authorization from your client to investigate background information before paying the minimum amount. To get this authorization, have your client sign Form T1153, Consent and Request Form. No other form is acceptable, and only the client information listed on the form will be disclosed. You must keep Form T1153 on file for three years after the end of the tax year in which it was signed, even if you did not discount the client's return.

You must follow all provincial and territorial regulations regarding contracts.

We will make all tax refund cheques and individual direct deposits in the client's name. We will show your name as part of the address on the notice of assessment or notice of reassessment.

Contact your financial institution to find out what documents they need to allow you to cash your clients' payments.

What if the actual refund is less than the estimated refund?

If the actual refund of tax is less than the estimated refund, any repayment you request from the client cannot result in the client receiving less than the minimum payment. Also, when determining the amount you can collect from the client, you have to include any refund interest we paid in the amount of the actual refund.

Calculate the amount you can collect from the client as shown in the following example:

This calculation does not apply in situations where the actual refund is less than the estimated refund because we used part of the refund to pay the client's debt to the Crown (such as student loans, overpayments of Employment Insurance benefits, or garnishments under the Family Orders and Agreements Enforcement Assistance Act). In this situation, you can collect from the client the amount of the refund that we used to pay his or her debt.

Client debts

Although a client may be entitled to a refund, we may keep some or all of it to:

• apply against any amount the client owes us or is about to owe us;
• satisfy a garnishment order under the Family Orders and Agreements Enforcement Assistance Act; or
• apply against certain other outstanding federal, provincial, or territorial government debts, such as student loans, Employment Insurance and social assistance benefit overpayments, Immigration loans, and training allowance overpayments.

If you are aware of such a debt when you acquire the right to the client's refund, you have two options for the amount you enter in Box A, "Estimated refund amount," on Form RC71. Use this amount when calculating the minimum amount to pay the client and the discount.

Option 1: The amount from line 484 of the client's tax return minus the debt

Administratively, we accept that interest may be calculated by the discounter and added to the interest-bearing amount that the client owes us (or is about to owe us) to allow for the period between the time the outstanding balance amount is provided to the discounter, and the time the tax return is assessed. In such cases, the interest must be calculated using an interest rate not higher than the CRA prescribed interest rates for a period no longer than our published EFILE processing standard of two weeks (or our paper-processing standard, if you are filing paper returns). For more information about our rates and standards, visit our Canada Revenue Agency Web site.

Documentation on your clients' files must show the amount of the debt, the interest charged, to whom it was owed, and the source of this information.

Option 2: The amount from line 484

If you choose this option, you must pay the debt before you discount the client's refund. When your payment has been processed you then calculate the minimum amount to pay to the client on the estimated refund ($1,200 in the above example).

Completing a client's return

We will send the client's notice of assessment to your permanent mailing address as shown on Form RC76, Application and Agreement to Obtain a Discounter Code / Discounter Direct Deposit Enrolment.

If you use EFILE to file your client's return, make sure that you enter your client's current address when transmitting the return to us for processing. Do not enter your own address in the identification area when transmitting the return.

If you are filing a paper return for your client, complete the client's current address in the space given on page 1 of the return or, if available, attach the client's personal label. If the client's name, address, social insurance number (SIN), or the spouse's or common-law partner's SIN on the personal label is incorrect, put a line through the wrong information, and clearly print the changes on the label. Do not enter your own address in the identification area of your client's return.

We will send all refunds from discounted returns to you. However, there may be instances when we send a discounted refund to a client in error. If this happens, you have to get the refund back from the client, as stated in subsection 2(3) of the Tax Rebate Discounting Act:

"A right to a refund of tax acquired by a discounter from a client is enforceable only between the client and the discounter and nothing in this Act shall be construed as creating any liability between the discounter and Her Majesty."

Requesting adjustments

What if the client provides new information after his or her tax return is filed?

If the client provides new information that changes his or her return, an adjustment is required to the return. If you discount an additional refund resulting from the adjustment to the return, complete a new Form RC71. Write “Additional information” in the blank box at the top of the form.

The amount in box A must reflect only the amount of the additional refund. However, you have to consider the initial discounted refund when you calculate the discount on the additional refund, since they are both for the same tax year. If the initial discounted refund was $300 or more, you must pay the client 95% of the additional refund.

New discounted refund:

New information is filed, which results in an additional refund of $500.

Pay the client: $500 × 95% = $475

You cannot pay the client 85% on the first $300 of the additional refund, since you already paid 85% on the first $300 of the initial refund for the same tax year.

What if you receive a refund that is less than the estimated refund?

If you receive a refund that is less than the estimated refund, you can submit information to reinstate the estimated refund in whole or in part. Include a photocopy of the original Form RC71 with your request for adjustment. Print "Additional information" in the blank box at the top of the form.

We will send the notice of reassessment or any resulting refund to the client if Form RC71 is not included with your request for adjustment.

Do not delay providing Form RC72 and the notice of assessment to the client while waiting for the reassessment.

Discounter code on a client's return

If you use EFILE to file your client's return, enter your discounter code before transmitting the return to us for processing.

If you are filing a paper return for your client, enter and highlight "Disc. code no." and your discounter code to the right of the pre-printed word "Identification" at the top left corner of page 1 of the client's tax return.

If you do not enter your discounter code on the return, we may direct the notice of assessment or the refund to the client.

Fraudulent discounted returns

To protect your interests and the integrity of our tax system, take proper care to verify the identity of your client. Ensure your client has documents such as information slips and receipts to support all income, deductions, and credits reported or claimed on the return. Verify the authenticity of these information slips before conducting financial transactions.

For additional information about reporting a suspected violation of any tax law, please contact the Enforcement and disclosures programs division nearest you.

Authorization to represent your client

We will only release confidential client information if the client has given you written authorization to represent him or her in matters related to the Income Tax Act. For more information, call our individual income tax enquiries service at 1-800-959-8281.

For more Information

In addition to this guide, we provide information for discounters at Information for discounters.

This guide explains the most common situations. If you need more help after reading it, or you have changes pertaining to your business (such as a change of address), contact us at:

Represent a Client and Discounter Services Section
Canada Revenue Agency
3rd Floor
750 Heron Road
Ottawa ON  K1A 0L5

Telephone:	613-941-8864
	613-946-1314
Fax:	613-941-8868

If you need information about filing an income tax and benefit return, or about a client's refund, read the General Income Tax and Benefit Guide or call our individual income tax enquiries service at 1-800-959-8281.

Our service complaint process

Step 1 - Talk to us

If you are not satisfied with the service that you have received from us, you can make a formal complaint. Before you do this, we recommend that you try to resolve the matter with the CRA employee you have been dealing with or call the telephone number that you have been given.

If you are not pleased with the way your concerns are addressed, you can ask to discuss the matter with the employee’s supervisor.

Step 2 - Contact CRA - Service Complaints

The CRA - Service Complaints program is available to individual and business taxpayers, as well as benefit recipients. This program gives you another level of review if you are not pleased with the results from the first step of our complaint process. Generally, service-related complaints refer to the quality and timeliness of work that we have performed.

To bring your complaint to the attention of CRA - Service Complaints, complete Form RC193, Service-Related Complaint, which you can get by going to Service complaints or by calling 1-800-959-2221.

Step 3 - Contact the Taxpayers’ Ombudsman

If, after following steps 1 and 2, you are still not satisfied with our service, you can file a complaint with the Office of the Taxpayers’ Ombudsman.

For information about the Taxpayers’ Ombudsman and how to file a complaint, please visit Taxpayers' Ombudsman.

Your opinion counts

If you have any comments or suggestions that could help us improve our publications, we would like to hear from you. Please send your comments to:

Taxpayer Services Directorate
Canada Revenue Agency
750 Heron Road
Ottawa ON  K1A 0L5