The 30th of April is a significant day in the life of most Canadians. It is the last day for them to file their taxes. Failure to do so could bring about dire consequences.
There are many reasons you can fail to file your taxes, most of which may not be intentional. For instance, you can fall seriously ill during tax season, and if you live alone, chances are there’d be no one to help you with the paperwork.
However, for every action, there is a reaction, and you can expect the Canadian government to react when you skip your taxes for the year. These are some things to consider if you don’t file your taxes in Canada.
Late taxes better than no taxes
Sometimes the hectic nature of our lives can be taxing on our minds (pun intended). If you realize too late that you’ve not filed your taxes because you’ve got a lot going on, you should roll up your sleeves and take action.
Many Canadians skip their previous taxes for one reason or the other, then freeze like a deer in the headlights when they’re confronted with the current tax returns.
When it comes to taxes, procrastination is dangerous. The Canada Revenue Agency is the body saddled with the responsibility of making sure every Canadian pays their taxes on time.
If you are late on your tax returns, you should quickly contact the CRA. They are in the best position to let you know whether you’ve incurred a penalty as well as outline the best way to pay off your debt to the government in the shortest time possible.
Let’s establish one thing. You’re late on your taxes. But that’s not entirely a bad thing in and of itself. If you have no outstanding tax, you won’t incur penalties.
Nonetheless, you’re still liable for some financial loss. Late filing can delay your benefits like your Child Tax Benefits and GST. If the government cannot determine your income, you could miss out on credits.
If you have outstanding taxes and you do not file your returns on the 30th of April, you will begin to incur penalties from the 1st of May. In addition to that, the interest on your unpaid taxes will be compounded daily. You will also pay:
- 5% of your total taxes as the late filing fee.
- 1% of your total taxes as additional charges for each month you’re late.
- Additional interest in the charges above.
If you’re a serial tax defaulter, and the CRA has penalized you for filing late before, the Canada Revenue Agency has the power to double your penalty for each time you file your taxes late. Your monthly additional charges increase from 1% of your total taxes to 2% up to 20 months, and your late filing fee jumps to 10%.
If you default two times or more in less than five years, you’re liable to be charged with a repeated failure to report income penalty. It is the mother lode of all penalties and will set you back 20% of your undeclared income for the most recent tax year.
If you actively seek to default on your taxes by not filing any returns, or you tamper with the figures of your declared income, you’re most likely inviting a government investigation on yourself. The consequence is that you can end up being fined hundreds of thousands of dollars as well as jail time for tax evasion.
It is important to understand the policy of the CRA is not to throw tax defaulters in jail but to encourage them to pay their taxes. Besides, they don’t take every case to court except for cases with a high chance of conviction.
The CRA provides incentives for tax defaulter to pay their taxes through their amnesty program. An individual who voluntarily discloses an undisclosed income can avoid prosecution and penalties. The program has no time limit, after which you cannot apply for amnesty.
So what are you waiting for? Quit holding out on your tax returns and contact the CRA today.