The tax deadline has come and gone – now what? It might feel easy to ignore the issue at first, but as time ticks on, you can only bury your head in the sand for so long. Taxes are a legal obligation, and therefore strict consequences await those who don’t file on time. And who wants that hanging over their head?
Doing your taxes on time is not only a smart financial move, but also prevents the following penalties and problems from arising…
Late-filing Penalty
If you file your tax return late and end up owing money to the Canada Revenue Agency (CRA), you will be charged a penalty of 5% of your unpaid taxes, plus an additional 1% for each full month that your return is late, up to a maximum of 12 months.
Lessons hit harder the second time. Repeat offenders who have been charged a late-filing penalty in the previous three years will see that penalty double to 10% of their unpaid taxes, plus an additional 2% for each full month their return is late, up to a maximum of 20 months.
Accrued Interest
As if the late-filing penalty wasn’t bad enough, you will also have to pay interest on any unpaid taxes and penalties. When you file late, time is of the essence as interest is compounded daily from the due date until you pay in full. Making matters even more interesting, the interest rate can fluctuate every three months.
Loss of benefits and credits
One of the incentives for doing your taxes on time is that it confirms your eligibility for certain income-based benefits and credits, such as the Canada child benefit and the GST credit. Not filing automatically disqualifies you from receiving these bank balance boosts. After all, if the CRA doesn’t know how much you made last year, they can’t calculate what you’re owed.
Delayed processing
Filing your taxes the old fashioned, paper way can take longer for the CRA to process your return and issue any refunds or notices of assessment. Why add unnecessary interest to your penalties – get your taxes filed electronically, either online or thru our office.
Can’t file your taxes on time?
While not filing your taxes can have grave consequences, the good news is there are ways to avoid or reduce these penalties and problems if you act quickly and responsibly.
The CRA is more forgiving than you might think. If you have a valid reason for filing late, such as an illness, family emergency, or natural disaster, you can request taxpayer relief on any penalties or interest that you incur. To make this request, visit My Account or fill out Form RC4288.
If you cannot pay your taxes in full by the due date, contact the CRA to arrange a manageable payment plan. Depending on your situation, they may accept partial payments over time. Again, time is of the essence to keep those penalties and interest at bay! The sooner you contact the CRA, the more likely they are to work with you and offer some relief.
Need help filing your taxes or dealing with any nagging tax issues? Talk to us! We’d love to help you get back on track.
