For those with an interest in the intricacies, here is the email explanation I received from Benjamin Gao of TaxChopper after I gave him permission and he looked at my account entries:
"I checked your account. Line 232 is the unused foreign taxes. You paid 596.80 in total to the U.S., however, you can only claim 209.74 federal foreign tax credits and 96.91 provincial foreign tax credits, so the unclaimed part (596.80 - 209.74 - 96.61 = 290.25) is deducted at line 232 of your return.
The deduction is allowed under Canadian tax law. I am not a lawyer, however, our consultant is a chartered accountant, he okayed this a few years ago. We also have some clients deducted this amount before and got questioned from CRA (because in NETFILE, there is no place to put descriptions, CRA don't know where line 232 came from), and after explanation, none of them got bothered any more.
You can check the tax guide at CRA's form T2209, at the second page, second last paragraph, which readsAlso, on line 232 of your return, you may be able to deduct the amount of net foreign taxes you paid for which you have not received a federal, provincial, or territorial foreign tax credit. This does not include certain taxes you paid, such as those on amounts you could have deducted under a tax treaty on line 256 of your return.
You can get the T2209 at
I have to admit the calculation is not that easy. For example, according to other calculations, you would have claimed 338.67 total foreign tax credits. But once you apply the unused amount, both net income and foreign income (used to calculate the credits) will also change, and you will find you can only claim a less amount so you will have more unused taxes to deduct. If you do it manually, you can go several rounds to make them balanced or almost balanced.
To comply with CRA's test data (which are not optimized), we have a page to disable this feature, you can find it at our softwareGeneral Credit => Foreign Non-business Tax CreditYou tick-check the very last box at that page and save, then you will find we have the same refund as others, but it is $35 less.
I have no idea why all other companies are not claiming this deduction automatically, there is an obvious difference between the foreign taxes paid and foreign credit claimed. and the tax guides are there in black and white."
TaxTips.ca in Foreign Tax Credit seems to say the same as TaxChopper but if there are any tax accountants reading this it would be good to see your comments.
- Canadian tax rules are crazily complicated - we'll have to replace the expression "he's no rocket scientist" with "he's no tax accountant" as the measure of intelligence
- it appears that the various tax packages are more or less competent at finding and applying rules that can minimize taxes
- NETFILE certification testing does not test all legitimate tax minimization action and optimizations - note how Benjamin says that the CRA test data does not cover this particular optimization! ... if CRA were to develop its own free plain-jane online service, which by definition would only present the forms in a passive state without active optimization routines (and thus this is not an accusation of nasty motives against CRA), many people would grab it not realizing that they could actually save on taxes with private software such as TaxChopper's, so I'm gonna backtrack and say, CRA, please DO NOT develop a free online tax package! People would unwittingly pay more in taxes than they would save from the software being free.
- CRA could and should add further explanation to its NETFILE Sotware page in the yellow box, something to the effect, "Certification testing does not cover all the ways that the software packages may claim deductions, effect transfers of credits and deductions or perform optimizations that may result in legitimate differences in the net amount of taxes owing by, or refund payable to, a taxpayer. The packages may produce different results and yet still be acceptable to NETFILE."
- I only tested using one set of data and circumstances, so the lowest tax for any individual may come out of another package ... therefore, shop around and take the trouble to enter your data into a couple of different packages to see which gives the best result - they all will give you a bottom line refund due or amount owing before you pay. I note that TaxChopper offers a Maximum Refund Guarantee or your service fee refunded if any package beats them. I especially like guarantees that are never used, like warranties on cars that never break down.
No news yet from CRA, which is looking into the wide variability of my testing results. My ratings will need to be revised when the most accurate / lowest legitimate tax-payable package is revealed. Suffice it to say for now that TaxChopper has a leg up on everyone else.