The tax deadline approaches so fast and while you’re busy running your business or getting through with life, you may notice that you haven’t completed your income tax return. The deadline is usually very strict and sometimes, the CRA will extend it especially if it falls on a Sunday. The tax deadline for those employed and the self-employed/independent contractors may vary. It’s important to know which tax deadline applies to you and start filing early.
Have You Missed The Deadlines Before?
If you’ve missed the deadlines in recent years, expect the penalties to go up. For instance, if you have been through life’s challenges such as a divorce, job loss or separation, tax deadlines may have been the least of your worries. Most people end up not filing for many years when they get a job that pays cash. The mounting fees and interests can take the amount you owe in taxes to a whole new level. You can avoid these penalties simply by making it a habit to file your returns every year and on time.
There are cases where you can request a waiver of penalty if the interest is really high and even get a payment plan to stay up to date. However, the CRA will mostly consider situations where you were unable to make payments due to factors such as illness, death, a disaster such as fire, flood, and earthquake that affected you or if the delay is as a result of actions by the CRA such as processing errors. You can also get a waiver if the CRA requested for additional information or due to delays in processing. If your missed deadlines are due to deliberately misrepresenting your income, you’ll probably not qualify for a waiver. In fact, you may be convicted of tax evasion if you’re found to have deliberately been hiding income and not filing your returns.
Penalties For Filing Late
If you file your tax return late as an individual filer, you’re subject to the following late filing penalty:
- 5% of the balance you owe plus 1% of the balance you owe each month that the return is late up to a maximum of 12 months.
- The penalty increases to 10% of balance owing and 2% of balance you owe for each month the return is late up to a maximum of 20 months if you have been late for more than the last 3 years.
The deadline for filing depends on whether you are employed, self-employed or a business owner. Canadian corporations also have late filing penalties. All businesses that have been incorporated in Canada must file an annual T2 return whether the organization is active or not. If the business is inactive and you want to avoid filing the annual T2 return, you may want to consider dissolving it.
As mentioned, the CRA can waive the late-filing penalty as well as any applicable interest if you missed the deadline because of circumstances that are beyond your control. You have to make a request for relief from penalties and interest by filling the required form.