Whether you owe money to the government, or are expected a refund on your taxes, it can be too late to file your taxes.
The deadline for filing taxes in Canada is April 30th. If that date falls on the weekend it is then moved to the next business day. While you can file your taxes any time throughout the year, there are certain consequences for filing late.
These consequences depend entirely on whether or not you owe taxes to the CRA (Canada Revenue Agency) or if the CRA owes you a refund. Either way, filing late can cause serious disruptions in your finances.
If You Owe Money
If you owe money, and do not file your taxes or file them late, you can face a hefty penalty on the amount owing.
When you file late, or not at all, the CRA charges compound daily interest starting on the day after the due date (usually May 1st) on any unpaid amount. This includes any unpaid amounts from previous years.
The penalty for filing late is 5% on the total amount owing plus 1% for each month the return is late. This interest is calculated up to 12 months past the due date.
For example, if you owe $10 000 and file your taxes 5 months late, the CRA will charge 5% interest on the owing amount plus an additional 5% (1% for each month late). This means you will ultimately owe $11 000 on your taxes.
If You Are Owed Money
If you have money coming your way, you have up to 10 years to complete your return and receive your refund. Beyond that deadline, your refund is lost and cannot be claimed.
However, filing late even when you are receiving a refund may cause delays with your spouse or common-law partner if their refund depends on information from your return.
Another delay can occur if you receive benefit payments, such as the Canada Child Tax Benefit or the Working Income Tax Benefits, or a GST credit. Your payments may be interrupted since your eligibility is determined by your reported income.
Finding Out if You Owe Money or Not
In order to determine which set of consequences you could potentially face, you need to know whether or not you will be owing money to the government. You can do this one of 3 ways:
- Calculate your taxes via government provided forms.
- Use online software to calculate your taxes.
- Have a company provide a free estimate.
However, if you are taking the time to fill out the necessary forms to determine whether or not you owe money, you may as well file the taxes. Even if you do owe, delaying the inevitable will only increase the interest on the amount owed.
Even If You Owe Money, You Should File As Soon As Possible
Despite whether or not you can pay the owing amount by the due date, you should file your taxes on time. Luckily, the CRA can work out a payment arrangement so you can make smaller payments over time until your debt is paid.
If you don’t, you are looking at that accruing interest on the unpaid amount beginning immediately after the tax filing deadline.
While ignoring the problem may seem like a good way to make it go away, letting your taxes sit in limbo will only make matters worse down the road – whether you end up paying large interest rates or lose out on GST credits and benefit payments.
Not Sure What to Do?
Contact us today to speak with a dedicated professional who will be more than happy to address your current situation and determine your tax-related needs.