Yahoo Finance Here's what could happen if you don't file your taxes
The deadline to submit your tax return is here, but you’ve buried your head in the sand and don’t plan to file on time because you can’t afford to pay what you owe. What Canada Revenue Agency (CRA) doesn’t know can’t hurt you, right?
Wrong.
There are ways for the agency to know you have unpaid taxes, including a matching system where CRA also receives a copy of any T4 slip you are issued from an employer.
Once they find out, not only are you on the hook for the amount owed plus interest (compounded daily starting May 1st), there is also a late filing penalty of five per cent on the balance owing, with an additional one percent for every full month you are late, up to 12 months. In other words, your penalty for missing a filing could be up to 17 percent, while the interest (which applies to the penalty too) continues to pile up.
Let’s say this isn’t the first time you’ve had this problem. If CRA penalized you for filing late in 2015, 2016 and 2017, and you are late again this year, the penalty for your 2018 tax return could double to 10 percent of what you owe, with an additional 2 per cent added for every month you are late, up to 20 months. That could add up to a whopping 50 percent.
So even if you can’t pay your balance on time, at least avoid the late-filing penalty by submitting your return by April 30th, Jennifer Gorman, head of customer success for self help at TurboxTax Canada, advised.
“Each month that goes by, you’re just accumulating more and more charges,” she said. “You’re going to have to file eventually.”
If you decide to get a student loan, or if you apply for a mortgage, for example, banks will ask for a copy of your most recent Notice of Assessment, the annual statement from CRA that includes details such as what you’ve paid or what you’re owed in tax refunds.
But what is the point of filing a return if you’ve done the math and you don’t owe any money?
It is not mandatory to file taxes, especially if you don’t owe a balance, but you are likely missing out on important credits and benefits from the government such as the Canada Child Benefit, Old Age Security, or your Canada Pension Plan. Sure, the government will pay retroactively if you file your return late, but if these credits and benefits are an important part of your monthly budget, any delay could have an impact.
This year especially, is a “game changer”, Gorman said, because of the climate action incentive payment for people living in Saskatchewan, Manitoba, Ontario and New Brunswick. The amount varies by province, but in Ontario, for example, a family of four could get $307.
If you filed on time, but made a mistake - you paid too little, you forgot to include a credit, or report an income - you can always go back and fix the error. CRA also has a Volunteer Disclosure Program, where they may consider waiving penalties if you voluntarily tell the agency about an amount you previously did not report.
“It’s in your own best interest to file,” said Gorman. “You might be surprised. A lot of people don’t realize that they’re going to get a refund until they actually sit down and it doesn’t take any time these days to prepare a tax return.”
