Filing Taxes Late in Canada: Your Guide to Penalties

Tax season has lengthy been a busy time of yr for Canadians. Whereas submitting taxes early and getting them out of the way in which is preferable, it’s simple to place it off and wait till the final minute to do your taxes. Right here are some things it’s best to know earlier than you think about submitting your taxes late.

Even in a comparatively uneventful yr, there are numerous distractions that may result in individuals saying “I’ll do it tomorrow.”

However what occurs in the event you don’t file your taxes on time? Is there a penalty for submitting taxes late even in the event you owe nothing? How do you file late tax returns in Canada? Let’s discover out!

Discover Out All the things You Have to Know About Your Taxes. Try our free webinar on submitting your tax return in partnership with TurboTax. 

The Tax Deadline in Canada

Firstly, it’s necessary to know what the tax deadline is in Canada. For many Canadians, the non-public earnings tax submitting deadline is April 30. For Canadians who’re self-employed (or their partner/common-law companion is self-employed), the deadline to file tax returns is June 15.

Nevertheless, if you find yourself owing taxes in your tax return, your self-employed income tax, or in case your partner/common-law companion is self-employed, your taxes have to be paid by April 30 to keep away from curiosity fees. So, it is best to file your taxes by the usual April 30 deadline, even in the event you’re self-employed—simply in case you owe.

What Occurs if You File Your Taxes Late in Canada?

So, what occurs in the event you miss the deadline for submitting your private earnings taxes? Nicely, the Canada Income Company (CRA) does have a process in place for accepting late tax returns from Canadians.

Nevertheless, it’s best to know that submitting taxes late in Canada could trigger you to be subjected to penalties, curiosity fees, and/or the (momentary) lack of sure authorities advantages till your taxes are filed and processed.

What Is the Penalty for Submitting Taxes Late in Canada?

In case you owe taxes on your tax return, the CRA will cost compound curiosity every day beginning Might 1, on any quantities you owe. How a lot is the curiosity? The CRA will cost a 5% late tax submitting penalty in the event you file your taxes after the deadline and also you owe taxes. Then on prime of that, they are going to cost an additional 1% for each month it is late, as much as a most of 12 months, on any taxes you owe. 

For instance, say you owed $1,000 and filed late. In case you filed on June 1, the CRA would cost a 5% late penalty for lacking the submitting deadline. This could add an additional $50 to the overall quantity you owe. Then, they’d cost one other 1% for Might, which works out to about $10 (or roughly $10.50 as a result of compound curiosity) for the additional month. That’s over $60 of additional cash owed to the CRA only for submitting late. 

In case you’re a repeat offender and had been charged a late submitting penalty on any of your final three tax returns, the CRA could improve that late penalty from 5% to 10% on any quantity you owe for 2020. Plus, they could cost an extra 2% (as an alternative of 1%) on what you owe for each month your tax return is late, as much as 20 months. 

One of the simplest ways to stop this from taking place is to file your taxes on time, even if you can’t pay on the time while you file. If you cannot pay your steadiness to the CRA in full, you possibly can work with the CRA to repay your private earnings tax debt (plus curiosity) over an extended time period by means of what’s known as a cost association.

What Ought to You Do if You Miss the Tax Deadline?

In case you miss the deadline, don’t panic, however be sure that to file your tax return as quickly as attainable. Pay what you owe. By lacking the deadline, you’ll be charged a 5% penalty, plus 1% for each full month late, however the sooner you pay your taxes, the higher.

Is There a Penalty for Submitting Taxes Late if You Owe Nothing?

So, what occurs in the event you file late with the CRA, however you don’t really owe any cash? Submitting taxes late while you don’t owe could not lead to any curiosity fees, because the CRA can’t apply curiosity on cash you do not owe. Nevertheless, it may well result in different points.

For instance, in the event you obtain authorities advantages, in lots of instances you must file an annual tax return to maintain receiving them uninterrupted. The federal government makes use of tax return info to confirm eligibility for sure help applications. In case you fail to file your taxes on time, your protection below these applications could lapse. A few of the benefits where you need to file your tax return so as to preserve receiving them embody the Assured Earnings Complement (GIS), the GST/HST credit score, and the Canada Youngster Profit (CCB).   

You also needs to know that different advantages in several provinces and territories may additionally be affected if taxes aren’t filed on time.

Can You File A number of Years of Taxes Collectively in Canada?

What must you do in the event you haven’t filed your taxes in years? Software program applications on-line will help with filing taxes for previous tax years. It’s also possible to request income tax packages for previous years from the CRA. Bear in mind: it is best to contact them first earlier than they’ve to trace you down. 

The CRA has a Voluntary Disclosures Program (VDP) that may assist people who have not filed a tax return for earlier years. It could possibly additionally assist those that must right info on a tax return they’ve already filed. If the CRA accepts your VDP utility, you might qualify for some aid on tax debt curiosity or different penalties by voluntarily reporting errors or omissions in your tax filings earlier than the CRA discovers or contacts you about them. 

The CRA additionally provides taxpayer aid provisions the place they waive penalties or curiosity for individuals who could not meet their tax obligations for sure causes. This contains monetary hardships, and circumstances past your management, like a critical well being challenge or pure catastrophe.

The CRA additionally provides taxpayer relief provisions the place they waive penalties or curiosity for individuals who could not meet their tax obligations for sure causes. This contains monetary hardships, and circumstances past your management, like a critical well being challenge or pure catastrophe.

How Lengthy Can You Go With out Submitting Your Taxes in Canada?

In case you owe taxes, you could pay your taxes for that tax yr to keep away from penalties or authorized problems. In case you want aid, the CRA can waive sure charges for a most of 10 years. In any other case, you’ll face the penalty for submitting taxes late in Canada.

How Far Again Can CRA Audit?

Usually, the CRA can audit tax returns inside 4 years of the Discover of Evaluation. Reassessments will be accomplished inside three years. Nevertheless, in case you are suspected of fraud, there isn’t a statute of limitations.

What Occurs if You Don’t Pay Your Taxes?

So, what occurs in the event you don’t pay your taxes in Canada? The very first thing that occurs is that the CRA begins assessing the penalties and curiosity fees talked about earlier. Then, after about 90 days from the date they ship you their discover of evaluation, the CRA could begin to take legal action, beginning with an try to present you a verbal warning by telephone and a written authorized warning letter.

A few of the authorized actions the CRA could take embody:

• Garnishing your wages to gather the excellent tax debt
• Redirecting funds from different authorities advantages you’d usually obtain to cowl what you owe
• Placing a lien in your property (in excessive instances)
• Seizing and promoting property to repay what you owe (once more, in excessive instances)

To keep away from this, it’s normally finest to file your taxes as quickly as attainable. In case you can not pay your taxes in full on the time of submitting, contact the CRA and make preparations to pay them on a schedule that works along with your funds. This will help keep away from wage garnishments, or worse. 

Do you want assist coping with any taxes that you simply owe and different types of debt, like bank card debt? Contact us for a free Debt Evaluation and we will discuss totally different choices it’s important to repay any unsecured money owed that you simply owe. 

Tips on how to Keep away from Late Submitting within the Future

Need to keep away from lacking tax deadlines? Keep away from late submitting by:

• Setting digital reminders
• Submitting installment funds
• Utilizing CRA-approved software program

Are you scared of filing taxes late? Attempt to negotiate with the CRA by:

• Explaining your monetary scenario
• Asking for an extension
• Establishing a cost plan

For extra tax recommendation, Neal Winokur, writer of The Grumpy Accountant shared the following tips for submitting your taxes on time on Credit score Canada CEO Bruce Sellery’s Moolala: Money Made Simple podcast:

“Try to keep on prime of it all year long. So for instance, you’re allowed to maintain scanned copies of all your receipts and paperwork. Individuals don’t know that. So lots of people get very scared and annoyed at tax time as a result of they should look by means of piles of receipts and paperwork they usually put all of it off till March or April, after which they should spend hours and hours going by means of piles and containers of paperwork, which is a loopy system. 

All it’s important to do is, as quickly as you get a receipt in the course of the yr, simply scan it in, preserve a folder in your laptop and you’ll name the folder tax paperwork. After which on the finish of the yr, it’s all able to go. It’s all proper there, scanned in. And you may ship it to your accountant, or in the event you file your personal taxes, you’ve the whole lot proper there. You’re organized and also you’re on prime of it all year long. After which on the finish of the yr, it’s loads simpler for you.”