At Calgary’s Choice Tax Services, we always recommend filing your income tax return on time. Canada Revenue Agency are in the business “of taking money” and they want the money they are owed in a timely fashion. As most taxpayers are aware, there is no penalty for filing your return late if you are receiving a tax refund.
There are penalties for filing a late return if you have a balance owing. There is an immediate penalty of 5% of your outstanding balance plus an additional penalty of 1% per month for every month that you are late in filing for up to 12 months.
Late-filing penalty example:
If you owe CRA $1,000 in income taxes and file your return 6 months late, you late filing penalty is: $1,000 x 5% = $50 plus 6 x 1% x $1,000 = $60 for a total penalty of $110.
The government can also charge you interest on the amount of taxes you owe (including the penalties) in addition to the late filing penalty.
If you were late in filing your tax return in previous years, the CRA can increase your late-filing penalty to 10% of the income tax owing, plus 2% per month up to 20 months.
In some circumstances (procrastination does not qualify), you may be able to apply for a waiver of the penalty. It is always best to at least file your return even if you cannot afford the income tax owing as then you will only be responsible for the interest owing and not a late-filing penalty.
For self-employed taxpayers, even though their income tax return is not due until June 15th, following the tax year, any income taxes owing beyond April 30th, will be subject to the same penalty and interest rules as every other taxpayer.
If you are expecting a refund, then definitely file your return as soon as you are able. CRA will not pay you interest on your refund if you file late.
Stay organized and disciplined so you keep more of your money; otherwise, the tax man will be more than happy to have you part with it!
Let us worry about your taxes so you don’t have to.
Sharon@CalgarysChoiceTaxServices.com or (403)703-7176