There are times when it’s acceptable to be late:
• When you’re late for work but the boss is even later;
• Parties when “on time” really means fashionably late;
• When traffic is bad enough to be newsworthy;
• When your child requires an immediate clean up
When you can’t get away with being late: Filing your taxes.
The tax filing deadline is rapidly approaching for Canadians; this year you’ll get a one-day extension since the April 30 deadline falls on the weekend. You must file online or have your return postmarked by May 1 to be considered on time.
On top of paying late penalties, your benefits such as GST/HST credits, old age security payments and Canada child benefit payments could be delayed or stopped if you miss the filing deadline.
Kevin Stienstra, Senior Manager, tax services group at Grant Thornton LLP, offered some helpful tips to clear up a few questions about filing your taxes on time with the Canada Revenue Agency (CRA).
What happens if taxpayers file late?
You’ll only pay a penalty if you owe money to the CRA, explained Stienstra. “The penalty is equal to 5 per cent of the amount owing plus 1 per cent for each month that you’re late.”
If you were to pay in May 2017, you’d be hit with that 5 per cent penalty right away, even if you’re just one or two days late, he said. “The maximum penalty is 5 per cent plus another percentage point every month for up to 12 months, for a total of 17 per cent after a year.”
“The first step is to get the tax returns prepared, to find out if you owe money or if you’d be getting refunds. If you are getting refunds then just file the tax returns, don’t be concerned about any penalties.”
What’s the deadline for self-employed Canadians?
If you or your spouse are self employed, you have until June 15 to file your tax return. However if you owe money you still must pay it by the April 30 deadline to avoid penalties. “The penalties are the main thing you want to avoid, as they’re the most punitive,” says Stienstra.
Will the CRA send notices or reminders?
“Sometimes they do, sometimes they don’t,” says Stienstra. “You’re not required to file a tax return in Canada, you’re only required to file one if you owe taxes… or if the CRA requests that you file one then you have to file.”
If you have no tax payable or if you have a refund coming to you there’s no requirement to file so the CRA doesn’t always follow up with taxpayers, he says.
What if filing late becomes a habit?
If you were charged a late penalty on any of your three previous returns, (2013, 2014, or 2015), then the penalty doubles, explains Stienstra. “So it would be 10 per cent initially plus 2 per cent per month… to a maximum of 20 months. The penalty can get up to 50 per cent.”
If you filed late in the past but had a refund, then you don’t have to worry — this rule applies only if you were charged a late filing penalty.
Is there a way to get an extension?
No. In the U.S. you can file for an extension, but in Canada we don’t have that, Stienstra explains. “If you’re late, you’re late and you’ll have to pay the penalty.”
However there are some taxpayer relief provisions, such as waiving interest or payments due to extraordinary circumstances or financial hardship, that may help taxpayers in difficult situations.
What if I file on time but don’t have the money to pay?
“You should always file on time even if you don’t have the money to pay. As long as you file on time, you won’t get hit with the penalty,” says Stienstra. You’ll only accrue interest on the balance owing.
“If you don’t pay for long enough, a collections officer will be assigned to your account and you’ll get calls; sometimes you can work with [them] to arrange a payment schedule,” says Stienstra. If you don’t deal with them at all and choose to ignore their correspondence, they’ve got broad powers to take collection action — that might mean garnishing your wages.
What about filing for a deceased person — do they get a break?
An estate can file by whichever is later – the usual April 30 due date, or six months after the person’s death.
What if I haven’t filed for a few years?
The CRA’s Voluntary Disclosure Program (VDP) allows taxpayers to voluntarily submit late tax returns if they meet specific criteria.
“If you’ve got a number of years that you haven’t filed tax returns and you know there’s balances owing, you can file under the VDP — you’re notifying the CRA that you haven’t paid your taxes and as long as they haven’t taken any enforcement action against you, they’ll typically allow it… and there will be no penalties charged,” says Stienstra.
“If the CRA has requested that you file a tax return, then you will not qualify for the VDP, or if you have used the program previously for the same matter — if you filed a whole bunch of tax returns late five or 10 years ago under the VDP and then you try to do it again, there’s a chance they could deny that as well,” said Stienstra. “It’s a one-time get out of jail free card.”