Countdown to the 2013 Tax Filing Deadline – Are You Prepared?

The countdown to the 2013 tax filing deadlines has started. Individual filers – as you know, you must have your returns filed no later than April 30^th and sole proprietors you must be filed no later than June 15^th. 

So what happens if you miss the tax filing deadline for your 2013 tax return? If you owe money it could be very costly. Here are the 2013 late filing penalties:

If you will owe tax for the tax year 2013 and fail to file your tax returns on time the late filing penalty is 5% of the balance owing to CRA. In addition, you will also have to pay 1% of the balance for each month that the return is late to a maximum of 12 months, the total penalty up to 17% on top of the taxes. 

Now, if you failed to file your 2010, 2011 or 2012 tax return on time the penalty may be increased. In this case CRA may increase your late filing penalty to 10% of the tax debt owed and charge you 2% per month on the balance owed, up to a maximum of 20 months. Not to mention the fact that you could be subject to prosecution (which is criminal charges)! 

Many hard working Canadians miss the tax deadline for different reasons. Some because their books are not in order and they have no idea where to start. Others know they will have a tax debt and are afraid that once they file and CRA becomes aware of their tax debt CRA will start coming after them. 

While it is true that if you have a tax debt CRA will come after you to collect it is not illegal to owe money to CRA. Failing to file returns is and can land you in big trouble. We have written elsewhere about what to do when you owe CRA money you cannot pay in full immediately so do not let that stop you from taking action and only making the problem worse for yourself. 

Where you have missed one or more deadlines to file do not panic!  There are different options available to combat penalties associated with a tax debt. These include a Voluntary Disclosure Program application or an application under Taxpayer Relief.  

Simply not filing makes you vulnerable to criminal prosecution and CRA issuing a notional assessment for those missing returns.  The notional assessment can be issued at any time and is basically where CRA estimates your income and assesses penalties and interest accordingly. And what CRA calculates will usually be much more than you really owe because they have no motivation to include your deductions and can even base it on a net worth assessment. When this happens they will use the amounts on their assessment to come after you. 

There is still enough time before the 2013 tax filing deadline to get prepared. If your books are not in order contact a tax professional to find out what you need to do to get ready - including what support services they can offer. If you don’t have proof of expenses you can order bank statements to start coming up with some estimates.  

Also, take a good hard look at your budget to start thinking about ways to pay your tax debt. If you absolutely know that you cannot pay the tax debt that you will owe, take a deep breath - there are solutions to deal with your tax debt. There are even some that will provide legal protection so that CRA cannot garnish your wages, freeze your bank account or seize your assets.  

For more information about the 2013 tax filing deadline, or for assistance with an already existing tax problem, please visit www.taxsolutionscanada.com or call 1-888-868-1400.