What Happens if you File your Taxes Late?
Did you miss the tax deadline? Have you not filed your income taxes? Wondering what happens if you file your taxes late? Well, late taxes are often subject to CRA interest and penalties that can balloon the amount owed to the CRA. Here are the real implications of filing your taxes late.
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Filing Your Taxes Late
For most people, in most years, the deadline to file personal income taxes is April 30th. But what happens if you file your taxes late? If you miss the deadline, and you owe money, you will be charged a late-filing penalty by the Canada Revenue Agency (CRA). This penalty will be 5% of the balance you owe, plus an additional 1% of the balance owing for each full month that your return is late, to a maximum of 12 months.
As you can see, what happens if you file your taxes late is that it will cost you.
In fact, if you were charged a late-filing penalty in any of the previous three years, and you file late again, your penalty could be increased to 10% of the most recent tax owing, plus 2% for each month your return is late, to a maximum of 20 months.
However, that isn’t it. If you file late and you also do not pay the balance owing on time, the CRA will charge compound interest daily starting on May 1st for any unpaid amounts. If you owe money from previous years, the CRA will continue to charge interest on those amounts as well.
Even if you do not owe money, filing late can still cause issues. You won’t receive government benefits such as the Canada Child Benefit if you don’t file on time.
This is why it’s very important to file your taxes when they are due. Even if you are not able to pay the full amount owing right away, filing your return on time can help you avoid the late-filing penalty and save you money.
Some people believe that, if you can’t pay what you owe, it’s better to not file at all. This is a mistake. The CRA will find you and you will be charged significant penalties when it does.
As mentioned, what happens if you file your taxes late is that the CRA charges interest and penalties. These can be very significant. However, in some situations, the CRA may waive penalties or interest charges should you choose to file an application for taxpayer relief. It’s important to note, though, that the CRA will only waive penalties and interest when an individual is unable to meet their tax obligations due to circumstances beyond their control.
Situations that may be considered for relief include: actions of the CRA that resulted in a late filing; extraordinary circumstances such as natural disasters or postal strikes; and extreme financial hardship that has made it impossible to pay the amount owing. The CRA may also consider other situations at its discretion.
If you are hoping to file for taxpayer relief, your best chance of being successful is to work with an experienced tax professional. At Farber Tax Solutions, we understand how the CRA works. We can help you prepare your taxpayer relief request, giving you the best chance of success. Contact us today to find out how our team can help.
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, lawyers, and experienced accountants.
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