Several times throughout the year, we have new clients appear with multiple years of outstanding personal tax returns to be completed. The stress of not filing returns on time can have a huge impact on our clients’ lives. In one case, a couple remarked that we had saved their marriage! Some people are embarrassed that they have not been filing. We are here to help and there is absolutely no judgement!
Have you experienced a significant life event?
In most cases, these clients have gone through a significant life event such as a separation, a death of a family member or moving to a new location. These situations cause so much additional stress to our everyday lives, and the tipping point is the filing of their personal tax returns. The unfortunate part is, that by not filing, they may be missing out not only the tax that is due back to them but on the refundable credits or deductions that lapse over time. Some benefits from the government stop when returns are not filed.
The GST credit, BC Climate Action Tax credit and Canada Workers Benefit for low income earners is only available for three years. This is calculated and applied for when filing your personal tax return. If you were employed and there was a Canada Pension Plan (CPP) overpayment, this can be claimed back for only four years. For an Employment Insurance (EI) overpayment, the time is three years. We have recently prepared returns for a client that had eight years to file. The credits they missed out on were in the thousands.
Did you stop receiving Canada Child Benefits?
The Canada Child Benefit is applied for when filing your personal tax return and will cease if the returns are not filed on time annually. The good news is this benefit will resume once the outstanding return is assessed.
What if you owe taxes?
If you have a balance owing on any year, there will be penalties and interest assessed. The Canada Revenue Agency (CRA) will charge you a late-filing penalty of 5% of your balance owing, plus 1% of your balance owing for each full month that your return is late, to a maximum of 12 months. The late filing penalty may be higher if you have been assessed a penalty in the past. The penalties and interest can be substantial coupled with the tax owing if you are self-employed and have not made instalments during the years that were unfiled.
There may be additional options.
In certain circumstances, there may be an opportunity to have the Canada Revenue Agency (CRA) waive the penalties and interest. The taxpayer may submit their returns through the Voluntary Disclosure Program (VDP). This program gives taxpayers the opportunity to file the returns that were missed and have the returns reviewed to see if the circumstances warrant the waiving of the penalties and interest. The application is not a guarantee there will not be amounts assessed. This program is also available to taxpayers who realize there was a mistake made on a return that has already been filed. If you have been contacted by CRA to file returns, the program is not available to you.
If the VDP turns down the application, it is possible to apply for other Taxpayer Relief Provisions. This program will also allow CRA to waive interest and penalties or grant extensions of certain filing deadlines. Under the Taxpayer Relief Provisions there are five circumstances under which you can apply:
- CRA Delay or Error
- Financial Hardship or Inability to Pay
- Death or Serious Illness, Mental Distress
- Natural or Human-Made Disaster
- Civil Disturbances
Let us reach out to the CRA before the CRA reaches out to you.
Sometimes taxpayers think it is better to be an ostrich and bury their head and not file taxes especially if they believe there are taxes owing. CRA knows who has not filed and yes, they may not have contacted you, but this is where you need to get ahead of them. The collections department of CRA will be willing to work with you if you are proactive in filing prior to them chasing you. To avoid them once calls are made can lead to CRA arbitrarily assessing what they think you owe. They will always err on the high side. Once this happens, the letters and calls from collections begin. By avoiding communicating with them, CRA can seize your bank account to satisfy the debt and to the far extreme, bring charges of tax evasion.
We’re here to help you.
It is never great to find yourself in these circumstances. If there are taxes owing, talk to us about how to approach CRA and create a payment plan that both you and CRA can live with. I believe there can be a happy ending. This week I prepared four years of returns for a client resulting in a $7000 refund of tax and Credits.
We are here to help and look forward to getting “the monkey off your back”!
Give us your books – take back your life! ®