What are the consequences of filing your taxes late?

It is up to you to file your income tax returns on time, allowing the CRA to assess them for accuracy. failure to file your taxes on time can be a costly error. In addition to paying your tax debt, the CRA will assess penalties and interest on your account. Get Farber Tax to assess your situation and help you avoid the consequences of filing your taxes late.

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What are the consequences of filing your taxes late?

 

Canada has a self-reporting tax system. This means that it is up to you to file your income tax returns on time, allowing the CRA to assess them for accuracy. For most individual taxpayers, there is a standard deadline of April 30. Self-employed taxpayers have an extended filing deadline of June 15.  Regardless of your deadline, failure to file your taxes on time can be a costly error. In addition to paying your tax debt, the CRA will assess penalties and interest on your account.

 

Under subsection 162(1) of the Income Tax Act, the late filing penalty starts at 5% of your unpaid tax due, and an extra 1% is added for each month that the return is late, up to 1 year. This means that the penalty can go up to 17% of your tax debt. If you were a late filer in any of the three previous years, you will be assessed as a repeated late filer. Under subsection 161(2), the penalty starts at 10%, and an extra 2% is added for each month, up to 20 months. This means that the penalty can be up to 50% of your original tax debt.

 

Under section 161 of the Income Tax Act, the CRA can charge interest on your unpaid tax debt owing. In addition, interest is also charged on any penalties you owe, including late filing penalties. Interest compounds daily and adds up quickly. In many cases, the penalties and interest can end up being greater than the amount you originally owed.

 

If you are overdue on your tax returns, there are two ways to seek relief from penalties and interest. If the CRA has not pursued enforcement action or issued an arbitrary assessment against you, you may be able to file your tax returns under the Voluntary Disclosure Program. Should you qualify, the CRA will waive penalties and interest in relation to those tax amounts.

 

Alternatively, if certain extraordinary circumstances have impacted your ability to file your returns on time, or you are struggling to pay the penalties and interest on your account, you may qualify for the Taxpayer Relief Program.

 

Qualifying for either program requires that you meet various factors, and can be quite tricky. If you’re considering applying for relief, contact us today for assistance on submitting an application to the CRA.

Farber Tax Solutions can help you successfully deal with CRA problems. We utilize the experience of our tax experts to:

  • 1| Offer a comprehensive solution that is focused on achieving the most favourable possible outcome for your tax issue;
  • 2| Communicate with the CRA on your behalf and navigate the entire CRA dispute process; and
  • 3| Offer a complete solution to your tax problems, including ex-CRA professionals and tax lawyers from Farber Tax Law.