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.
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.
Sohail Afzal, CPA, CMA, MBA
Sohail Afzal, (CPA, CMA, MBA) is the founder & CEO of GTA Accounting Professional Corporation. He is a highly experienced Chartered Professional Accountant and businessman himself and understands the challenges that many businesses face when it comes to cash flow management. As an experienced business consultant & tax advisor, he is helping companies grow by providing the technical, financial, and contractual information necessary for strategic decision-making.