Filing your Canadian income tax on time is essential to avoid penalties and interest charges. Even though there is a strike affecting the CRA, it does not mean you can delay filing your return.
In this blog post, we will discuss the importance of filing your Canadian income tax on time and the penalties you may be subject to if you are late.
Filing your Canadian income tax on time is important for several reasons. Firstly, the Canada Revenue Agency (CRA) requires all Canadian taxpayers to file their income tax returns by April 30th of the following year. When the 30th falls on a weekend, it is extended to the next business day. In 2023, the deadline is Monday, May 1st. Filing your income tax return on time ensures that you receive any tax refunds or credits you may be entitled to in a timely manner. If you fail to file your income tax return by this deadline, you may be subject to penalties and interest charges.
What are the penalties for filing your Canadian income tax late?
The penalty for filing your income tax return late is 5% of the balance owing plus 1% of the balance owing for each full month that your return is late, up to a maximum of 12 months. In addition to the penalty, you may also be subject to interest charges on any unpaid tax balance. The CRA charges compound daily interest on any unpaid tax balance, which can add up quickly.
If you have been assessed a late-filing penalty in any of the previous three years, the penalty for filing your income tax return late increases to 10% of the balance owing plus 2% of the balance owing for each full month that your return is late, up to a maximum of 20 months.
What should you do if you are unable to file your Canadian income tax on time?
If you are unable to file your Canadian taxes on time, you may be subject to penalties and interest charges. However, if you have a legitimate reason for the delay, the Canada Revenue Agency (CRA) may consider waiving one or both.
Your accountant can help you file your Canadian taxes and provide guidance on how to avoid penalties and interest charges.
To request relief from penalties and interest, you should contact the CRA as soon as possible and explain your situation. The CRA will review your case and determine whether you qualify for relief.
The CRA may be able to provide you with an extension or help you make arrangements to pay any tax owed. In some cases, the CRA may also waive or reduce penalties and interest charges if you can demonstrate that you had a reasonable excuse for filing your income tax return late. Examples may include:
- Natural disasters or other circumstances beyond your control
- Death in the family
- Serious illness or hospitalization
- Delays in receiving any necessary documentation from third parties
Even if the CRA agrees to waive any penalties and interest, you will still be required to file your tax return and pay any taxes owed. It is important to note that, even if you gain relief from those penalties and interest, interest on outstanding taxes will continue to accrue on any balance until it is paid in full.
While it might not seem like it, the CRA is there to help you.
Finally, it's always a good idea to work with a qualified accountant when preparing your taxes, as they can help ensure that your tax return is accurate and complete and that you take advantage of all available deductions and credits. Your accountant can also help you with tax planning throughout the year to minimize your tax liability and avoid any issues with the CRA. They can provide guidance on how to keep proper records, what expenses are deductible, and other tax-related matters.
Do not hesitate to contact our office to discuss your individual income tax needs.