Submitting Taxes Late in Canada: Your Information to Penalties

Tax season has lengthy been a busy time of 12 months 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. 

Even in a comparatively uneventful 12 months, there are numerous distractions that may result in folks saying “I’ll do it tomorrow.”

However what occurs if you happen to don’t file your taxes on time? Is there a penalty for submitting taxes late even if you happen to owe nothing? Right here are some things it is best to know earlier than you take into account submitting a late tax return.

The Tax Deadline in Canada

At the start, it’s essential 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 accomplice 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 earnings tax, or in case your partner/common-law accomplice is self-employed, your taxes need to be paid by April 30 to keep away from CRA curiosity fees. So, it is best to file your taxes by the usual April 30 deadline, even if you happen to’re self-employed—simply in case you owe.

What Occurs if You File Your Taxes Late in Canada?

If you happen to file a late tax return, the Canada Income Company (CRA) does have a process in place for accepting late tax returns from Canadians.

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

Widespread Misconceptions Round Canadian Taxes

Some Canadians can get confused about tax necessities and procedures. Listed here are three widespread misconceptions we regularly hear from purchasers:

MYTH: Submitting your taxes every year is a “guideline” not a regulation.
Submitting taxes in Canada is a authorized requirement for all Canadians. You’re anticipated to do it yearly or danger monetary penalties or withholding of presidency advantages and packages. 

MYTH: Taxes solely matter if you happen to owe or are owed cash.
It doesn’t matter whether or not you owe cash or expect a refund. Taxes impression your authorities advantages and doubtlessly your credit score rating (if you happen to owe). It’s good apply to file yearly to keep away from falling behind or dealing with penalties.  

MYTH: The CRA gained’t discover if I don’t file or file late.
They discover. Failure to file will lead to mailed notices or cellphone calls till you file and pay your steadiness.

What Is the Penalty for Submitting Taxes Late in Canada?

If you happen to owe taxes in your tax return, the CRA curiosity fees will compound day by day beginning Could 1, on any quantities you owe. How a lot is the curiosity? The CRA will cost a 5% late tax submitting penalty if you happen to file your taxes after the deadline and also you owe taxes. Then on prime of that, they may 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. If you happen to 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 full quantity you owe. Then, they’d cost one other 1% for Could, which works out to about $10 (or roughly $10.50 on account of compound curiosity) for the additional month. That’s over $60 of additional cash owed to the CRA only for submitting late. 

If you happen to’re a repeat offender and had been charged a late submitting penalty on any of your final three tax returns, the CRA might improve that late penalty from 5% to 10% on any quantity you owe. Plus, they might 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. 

The very best tax debt administration technique is to file your taxes on time, even if you happen to can’t pay on the time you file. If you cannot pay your steadiness to the CRA in full, you’ll be able to work with the CRA to rearrange a debt fee plan to repay your private earnings tax debt (plus curiosity) over an extended time frame by way of what’s referred to as a fee association.

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

If you happen to miss the deadline, don’t panic, however be certain to file your tax return as quickly as potential. Pay what you owe. By lacking the deadline, you’ll be charged a 5% penalty, plus 1% for each full month overdue, however the sooner you pay your taxes, the higher.

If you happen to’ve missed a number of years of tax submitting, you’ll be able to decrease CRA penalties and ask about tax curiosity reduction:

1. Name the Revenue Tax Enquiries Line at 1-800-959-8281.

2. Request mailed copies of all of your T4s and a personalised remittance voucher on your steadiness owing.

3. If you happen to skilled monetary hardship that prevented you from submitting or paying, submit an RC4288 type to ask to cancel or waive penalties and curiosity.

4. As quickly as your paperwork is available in, do your taxes immediately, earlier than you neglect or get distracted. 

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

So, what occurs if you happen to file late with the CRA, however you don’t truly owe any cash? Submitting taxes late whenever you don’t owe might not lead to any CRA curiosity fees, since they’ll’t apply curiosity on cash you do not owe. 

What occurs if I do not file my taxes, however I do not owe something?

It’s a great apply to at all times file, even if you happen to don’t owe cash. For starters, if the CRA owes you cash, you gained’t obtain it till your taxes have been filed. The federal government makes use of your tax filings to find out your eligibility for presidency advantages and packages, so failure to file might lead to your advantages and funds (together with your GST/HST rebates and Little one Tax Advantages) being cancelled. 

What occurs if I file taxes late however do not owe something?

Once more, get within the behavior of submitting on time, irrespective of your scenario for that tax 12 months. If you happen to file late and don’t owe something, you doubtless gained’t be charged any CRA penalties, however any rebates or advantages could also be paused or cancelled till the submitting has been acquired. 

How Late Submitting Impacts Your Authorities Advantages

If you happen to obtain authorities advantages, you should 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 packages. If you happen to fail to file your taxes on time, your protection beneath these packages might lapse.   

Listed here are widespread authorities advantages which may be affected if you happen to don’t file:

If the federal government owes you cash and also you’re late submitting, you don’t get your tax refund till you file. You also needs to know that different advantages in several provinces and territories may be affected if taxes aren’t filed on time.

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

What do you have to do if you happen to haven’t filed your taxes in years? Software program packages on-line may help with submitting taxes for earlier tax years. You may also request earnings tax packages for earlier years from the CRA. Keep 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 may well additionally assist those that must right info on a tax return they’ve already filed. If the CRA accepts your VDP utility, you can qualify for some reduction 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 tax curiosity reduction by way of taxpayer reduction 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 severe well being subject or pure catastrophe.

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

If you happen to owe taxes, you will need to pay your taxes for that tax 12 months to keep away from penalties or authorized issues. If you happen to want reduction, 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.

There are additionally long-term results of not submitting your taxes on time, together with:

• The CRA including liens to your property (residence, automobile, financial savings)

• A flag in your passport prevents you from leaving the nation

• Including to your credit score report beneath the “Public File”, impacting your credit score rating

• Calls, letters, and potential harassment from the CRA till you’ve paid

• Stress resulting in poor selections, job efficiency, or relationship struggles

So, whereas you’ll have some charges waived, the longer you don’t file your taxes, the extra doubtless the above authorized penalties might occur to you.

How Far Again Can CRA Audit?

Usually, the CRA can audit tax returns inside 4 years of the Discover of Evaluation. Reassessments could be accomplished inside three years. If the CRA thinks there could be a major error or omission in your return, equivalent to offering incorrect info, they might lengthen the audit interval to six years. 

In instances the place the CRA determines that you don’t have any reported earnings, there could also be no time restrict for assessing tax owed. This implies they’ll audit again indefinitely till the unreported earnings is resolved. It is advisable to maintain the data for no less than 6 years after the tip of the tax 12 months. This manner, you may have all the required paperwork prepared simply in case the CRA decides to take a better take a look at your return.

What Occurs if You Don’t Pay Your Taxes in Canada?

If you happen to don’t pay your taxes in Canada, the very first thing that occurs is that the CRA begins assessing the penalties and CRA curiosity fees talked about earlier. Then, after about 90 days from the date they ship you their discover of evaluation, the CRA might start to take authorized motion, beginning with an try to present you a verbal warning by cellphone and a written authorized warning letter.

Among the authorized actions the CRA might take embrace:

• 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 potential. If you happen to 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 price range. This may help keep away from wage garnishments, or worse. 

Do you want assist with tax debt administration? Are you fearful about coping with any taxes that you simply owe and different types of debt, like bank card debt? 

Contact or name us at 1 (800) 267-2272 for a free Debt Evaluation. We’lle overview the choices it’s a must to repay any unsecured money owed you owe. 

What to Do if You Can’t Pay Your Taxes

If for any motive you’ll be able to’t pay your taxes by the annual April thirtieth deadline, there may be assist for tax debt administration. With the CRA, you may have two choices:

CRA Fee Preparations On-line

You may make preparations to pay the CRA quantity you owe over time by way of a Fee Association. You possibly can schedule these your self by way of your CRA on-line account by way of a pre-authorized debt (PAD) settlement. Merely login to your account and comply with the prompts to enter your quantities, frequency, and banking info. 

Negotiate a Debt Fee Plan

You may also name the CRA to barter a fee plan based mostly in your monetary circumstances. Name the quantity offered on any CRA letters or collections notices you’ve acquired. 

Keep in mind that any funds made after the fee deadline are topic to curiosity funds till the total quantity has been paid. The earlier you’re in a position to pay your excellent steadiness, the much less the debt will develop. 

Learn how to Keep away from Late Submitting within the Future

Wish 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 terrified of submitting taxes late? Attempt to negotiate with the CRA by:

• Explaining your monetary scenario
• Asking for an extension
• Organising a debt fee plan

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

“Attempt 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 need to look by way of piles of receipts and paperwork and so they put all of it off till March or April, after which they need to spend hours and hours going by way of piles and containers of paperwork, which is a loopy system. 

All it’s a must to do is, as quickly as you get a receipt in the course of the 12 months, simply scan it in, hold a folder in your laptop and you may name the folder tax paperwork. After which on the finish of the 12 months, it’s all able to go. It’s all proper there, scanned in. And you’ll ship it to your accountant, or if you happen to file your personal taxes, you may have all the things proper there. You’re organized and also you’re on prime of it all year long. After which on the finish of the 12 months, it’s loads simpler for you.”