Beware the taxman: file before deadline or face consequences
TORONTO — Like many Canadians, Justin Schaefer gets stressed every year as the tax deadline approaches. And he has good reason to be. That’s because the last time the 32-yearold reported his income to the Canada Revenue Agency was for the 2011 tax year, and now he’s on the hook for $28,000 in back taxes and penalties. He’s not alone. According to the CRA, 8.6 per cent of Canadians who filed their tax returns last year did so after the April 30 deadline, triggering penalties, interest and in Schaefer’s case, warning letters, phone calls and even his missing returns completed for him by the federal government agency.
“Tax season gives me a lot of anxiety,” said Schaefer, who is a contract worker in audio visual production in Toronto.
Sheryl Troup, a director of tax and estate planning at Investors Group, said there are many reasons why Canadians file their taxes late, ranging from being too busy, dealing with personal or professional issues or just forgetting or not caring about the deadline.
For the self-employed or those whose spouse or common-law partner is selfemployed, the deadline to file is June 15. But for those who have a balance owing, it must be paid by April 30.
If someone owing taxes forgoes the filing deadline, they can expect to pay a five per cent late penalty on the balance they owe, plus one per cent of their balance owing for each full month their return is late, to a maximum of 12 months. And if being late is something that they’ve done before, it could be worse.
If the CRA charged a late-filing penalty on someone’s return for 2013, 2014 or 2015, the late-filing penalty for 2016 may be 10 per cent of their 2016 balance owing, plus two per cent of the 2016 balance owing for each full month the return is late, to a maximum of 20 months. “Procrastination is the worst,” said Troup.
Another common excuse she hears for delaying filing is that people believe they are entitled to a refund, and will not face any penalties if they file late.
But that isn’t necessarily true because late filers, especially those who are low- to middle-income, risk losing government benefits such as child tax credits, access to provincial assistance programs and GST rebates if they don’t file on time. The CRA uses current tax reports to calculate eligibility for those programs each year.
“The other thing is the concept of the refund is that you’re owed money,” Troup said. “So why let the government use your money rather than have it for yourself?”
She also noted that on-time filers will benefit from receiving their refund earlier rather than later because that money can immediately be put towards personal savings or investments.
A key to meeting the deadline is to ensure all the paperwork, including T4 slips and receipts, are in order, and to make sure you have the professional help of an accountant if you need it.
There are also strategies for late filers once they begin to catch up.
The CRA has a voluntary disclosure program that gives Canadians a “second chance” to correct a previously filed tax return or to file one that is late.
Taxpayers will still be required to pay any tax and interest that is owed, but under the program a filer can apply for relief from prosecution and penalties.