Have you filed your income tax up to date? The due date was April 30th for individuals and June 15th for business owners and professionals. There are downsides to not filing your taxes by the due date, including penalties, missed credit and benefit payments and more.
- Not filing your income tax on time when you have a balance due will result in a late-filing penalty of 5% of the balance owing, plus 1% of the balance owing for each full month the return is late, to a maximum of 12 months.
- If you have not filed your return by the due date and you were charged a late-filing penalty in the previous three years, you may be charged an increased penalty of 10% of the balance owing, plus 2% of the balance owing for each full month the return is late, to a maximum of 20 months.
- Your total balance due is subject to interest at the prescribed rate (6% at the time this post was written), therefore having late-filing penalties will result in greater daily interest charges.
- If you are entitled to GST/HST credits, provincial credits, Canada Child Benefit or GIS and you file your income taxes late, these payments may be delayed. This is essentially giving the government an interest-free loan.
- Not filing at all may result in the Canada Revenue Agency assessing the returns themselves without the deductions and tax credits you may be entitled. Reporting the deductions and tax credits could take up to a year and you will lose the opportunity to file under Voluntary Disclosure, which will be further discussed below.
The best solution to avoiding any of the downsides listed above would be to file on time each year. If you have any outstanding late returns or have been charged a late-filing penalty, then there are solutions available to you:
Voluntary Disclosure
If your return is at least 12 months past due, then you may be able to file under voluntary disclosure. This option allows taxpayers to disclose all the information related to a late return if the Canada Revenue Agency has not tried make contact in respect to the information being disclosed. If the voluntary disclosure is accepted, then the return will be assessed without a late-filing penalty. If you are over 12 months late in filing one of your returns, then contact us to get started on your application!
Taxpayer Forgiveness
If you have already filed a return late and have been assessed a penalty, then taxpayer forgiveness may be the option for you. Under certain circumstances, the Canada Revenue Agency may be willing to forgive penalties and interest if your situation meets certain criteria. Acceptable circumstances include serious illness, death of a family member, CRA errors and more. If you have been charged a penalty due to your inability to file during tough circumstances, then contact us to see you are eligible for taxpayer forgiveness!
To conclude, there is a table below showing four different scenarios: filing your taxes and paying the balance on time, filing your tax return on time and paying the balance one year later, filing your tax return late and paying the balance one year later without prior late-filing penalties, and filing the tax return late and paying the balance one year later with prior year late-filing penalties. It may not always be possible to pay your income taxes on time, but this chart illustrates that you should always file by the due date.
| Filing Scenarios |
Balance |
Interest* |
Penalties |
Total Payable |
|
| Filed and paid by due date | $ 1,000.00 | $ – | $ – | $ 1,000.00 | |
| Filed on time and paid 1 year later | $ 1,000.00 | $ 61.83 | $ – | $ 1,061.83 | |
| Filed late and paid one year later with no previous late-filing penalties | $ 1,000.00 | $ 68.88 | $ 170.00 | $ 1,238.88 | |
| Filed late and paid one year later with previous late-filing penalties | $ 1,000.00 | $ 75.94 | $ 340.00 | $ 1,415.94 | |
*Interest is calculated using the 6% prescribed rate at the time this post was written.