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Can I Late-File My Income Tax Returns?

January 19, 2023

By: Mina Alexander, Senior Associate, Farber Tax Law

As the deadline for filing individual tax returns approaches, taxpayers may still have tax returns outstanding from prior tax years. This can lead to a vicious cycle, where taxpayers continue not to file returns because prior years remain unfiled. Taxpayers can, however, late-file outstanding tax returns. Penalties and interest continue to accumulate as long as those returns remain unfiled.

Taxpayers are required to file their taxes each year. Taxpayers are also required to file tax returns that are outstanding from previous years. Even if you cannot afford to pay the amount owing, the CRA requires you to file a tax return. Tax evasion can be prosecuted as a crime, so it is important to file outstanding returns regardless of your ability to pay the amounts owing.

The basic late-filing penalty is 5% of the tax that was owing when the return was required to be filed, plus 1% times the number of complete months, not exceeding 12, until the date when the return was filed (with a maximum penalty of 17%). The penalty for repeated late-filing is higher – 10% of the unpaid tax, plus 2% times the number of complete months, not exceeding 20, until the date of filing (with a maximum penalty of 50%). The CRA may also impose penalties amounting to 50% of the tax owing for a taxation year in certain situations.

The CRA may send taxpayers demand to file letters for outstanding taxation years. If you have not received a demand to file a return, you may be eligible to file the returns and obtain relief from penalties and interest.

If you have outstanding returns and haven’t yet been contacted by the CRA, significant penalty and interest relief are available through the CRA’s Voluntary Disclosures Program. Even if you have been contacted, a properly structured taxpayer relief application can also obtain relief.

The best time to file your returns is when they are due, but the second-best time is now. At Farber Tax Law, we offer free consultations and have helped hundreds of taxpayers in exactly your position.