- I did not know there was a tax filing deadline.
- I did not have the money to pay the taxes and was going to file as soon as I had the money.
- I was too busy running my business and forgot.
- I cannot afford an accountant.
- I still owe money from last year, etc. and do not want to make the problem worse.
- Some of my friends have not filed in years and have saved thousands in taxes.
- CRA cannot sue you if the tax year is more than three years old – “statute barred”
Some of these reasons
are factually incorrect. Some are
figments of the taxpayer’s imagination.
Whatever the reason,
the why does not matter to Canada Revenue Agency (CRA) - they only care that
you owe.
The consequences for
failing to file your income tax return can be harsh, and have frequently ended
with individuals facing criminal convictions. Visit the CRA links below and if
you are a non-filer please DO something about it before your late filing issue
becomes a nightmare:
- http://www.cra-arc.gc.ca/nwsrm/cnvctns/on/on141202-eng.html
- http://www.cra-arc.gc.ca/nwsrm/cnvctns/on/on140708-eng.html
For those who have not
yet been contacted by CRA there is a CRA program, Voluntary Disclosure Program
(VDP), to encourage people who have missed tax filings to come clean and avoid
penalties and much of the interest. However, access to this program has some
very precise hurdles that require experience to navigate. It is effectively a
one-strike-and-you-are-disqualified system (it looks great politically but
really they would prefer to get all the interest and principle) and it is easy
to make a mistake and miss this once-off opportunity to get the tax house in
order.
If you have some very
specific reasons for having missed your filing there is another program that
CRA has that can also relieve you of some of the interest and penalties. This
is called a Taxpayer Relief Application and it too has very precise hurdles in
order to be successful. Again, it is best to engage a professional corporation
that does this type of work as their main business to ensure you get all the
relief you are entitled to.
The penalties for late
filing are significant. The first year
you file late, the penalty can reach 17% of the balance owing. If you file late the next year (or any of the
next 3 years), the penalty can rise to a staggering 50% of the balance
owing. The icing on the cake is that
these penalties also attract expensive interest charges as well.
The way late filing
penalties work is that you pay an immediate penalty of 5% of the taxes,
followed by 1% for every month the return remains outstanding, up to a maximum
of 12 months or a total of 17% of the balance owing. But wait - if you were
late in any of the three previous years, the above penalty doubles to an
immediate penalty of 10% plus 2% for every month the return remains
outstanding, up to a maximum of 20 months or a total of 50% of the balance
owing. As you can see, late filing your returns will quickly push you into a
dark hole which will require the services of a tax professional if you ever plan
on climbing back out.
The best thing you can
do is get expert advice on your situation and which relief programs you may
have access to from a firm which specializes in tax disputes. Once you know the facts, your taxes will be
prepared and filed. Very fair repayment terms will be worked out with CRA by an
expert who knows the rules by which CRA collectors are obliged to work (but
which rules they do not share which is why the expert firms in this area are
staffed by ex-CRA collectors and auditors who know the game!).
Want to stop looking
over your shoulder, to avoid aggressive CRA enforcement tactics like frozen
bank accounts, garnishments and liens on houses, and potentially even a
criminal record? Contact Tax Solutions Canada today - we specialize in tax
arrears and can help you get things back under control. Call us today at 1-888-868-1400.
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