What are the Penalties You Could Incur For Late Tax Filing in Mississauga?
January 12, 2022 | Written by: Sohail Afzal
Canada Revenue Agency(CRA) requires that individual taxpayers file their income tax returns on or before April 30 of every year, if that date falls on a holiday or weekend. As a means of ensuring compliance, the agency imposes fines and penalties.
What is the Penalty for Filing Your Income Taxes Late?
If you don’t owe any further taxes or earn a refund, you will not be penalized for filing your taxes late. The CRA charges penalty rates on taxes owed if you file late and owe money. If you file late and owe money, your penalty equals five percent plus an additional percent per month for up to a year.
The CRA receives tax payments on the day individual tax returns are due, April 30. Compound daily interest is charged on all amounts due if you cannot pay the whole amount.
All of your payments will be applied to your oldest tax debts if you owe taxes for several years.
The CRA will charge you a 10 percent penalty if you file your tax return five months late.
Penalties for Small Business Owners in Mississauga
You may be responsible for filing additional returns as a small business owner, such as payroll, GST, and HST remittances and withholdings. For self-employed people, you also have a longer filing deadline. The deadline to file your tax return each year if you are self-employed (unincorporated business) is June 15. But if you end up owing, the penalty and interest will begin accruing on April 30th.
In the case of payroll accounts, the CRA can issue penalties and interest for noncompliance. The penalty for failing to deduct will be 10% for the first failure and 20% for each additional failure.
If you fail to file or pay your CRA taxes on time, you will be subject to penalties of up to 20%; as you can see, the CRA takes calculations, withholdings and submissions of payroll source deductions very seriously, and so should you; these deductions directly affect employees.
You must also submit to the CRA employee information return each year as an employer. Those with fewer than 50 returns are penalized $10 per day, and businesses with more employees are significantly penalized.
Late filing penalties also apply if you collect GST/HST. The CRA calculates the late filing fee using A + (B x C) formula.
The formula uses A to represent 1 percent of the amount you owe, B to represent 25 percent of A, and C to represent the number of months the return is late.
Say you have an outstanding GST/HST invoice for $1,000, and you send your payment three months late. The formula would be $10 + $2.50 times three. That’s $17.50.
Interest Relief for 2020 Income Taxes Owing
If you are unable to pay your income taxes (April 30) on time, there may be some relief from interest accruing.
To be eligible, you must have earned no more than $75,000 from all sources in 2020, along with receiving one of the COVID-19 emergency or recovery benefits in 2020. A tax return for 2020 is also required to be filed.
For 2020 only, you will be eligible to receive interest relief on taxes owed up until April 30, 2022, if you meet all of those criteria.
Consider the Taxpayer relief provisions if you’re unable to pay your outstanding taxes owing but still need help paying your taxes.
False Statements and Tax Evasion
CRA may assess a penalty of at least $100 or 50 percent of your unpaid tax or falsely claimed credits if they determine that you have knowingly made false statements on your tax return.
In addition, the CRA has several other options for reassessing tax returns. For unreported income and tax evasion, you may face criminal convictions, fines, and even jail time if the agency notices that your lifestyle differs significantly from what you reported.
As important as filing your taxes, it is more important to ensure you don’t make any false statements or try to evade taxes. Even the slightest miscalculation can land you in big trouble. It is advisable that you get in touch with an experienced and professional accounting firm in Mississauga so they can help you save your money and not get in trouble with the CRA.
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.