No one looks forward to income tax time. If you miss the filing deadline for your Canadian income tax return, you don’t need to fret. Even though there are consequences for late filing, ignoring the matter completely is definitely the wrong way to handle this situation.
You can use any of the standard filing tools that you would normally use to prepare your tax return if you are filing late. However, you should be prepared to pay a late filing fee on top of any taxes you may owe for the year. Under no circumstances should you not file your tax return, as this could result in serious penalties from the Canadian government.
Income Tax Filing Deadlines in Canada
The Canada Customs and Revenue Agency is responsible for collecting and processing income tax returns. It issues refunds and collects payments from millions of taxpayers annually. The due date for filing a return is April 30. If this date happens to fall on a weekend or a holiday, the deadline is extended to the next business day. Income tax returns received or postmarked by this date are considered to be on time. If you were self-employed, you have until June 15 to file your income tax return, but if you have a balance owing for income taxes, the payment is due by April 30.
Late-Filing Penalty for Income Taxes in Canada
The CRA charges a penalty as soon as you are late in filing your income tax return for the current year. It is 5 percent of the amount you owe. The penalty will increases by 1 percent of the balance for each month the balance remains unpaid, up to a maximum of 12 months. In a situation where you were charged a late-filing penalty for any of the three previous years, CRA will up the ante by doubling the late filing penalty to 10 percent of your balance owing. You will also be charged 2 percent of your unpaid balance for every month your return is late, up to a maximum of 20 months.
Interest Owing on Late Tax Returns
If you don’t file your income tax return on time and you owe money for unpaid taxes, CRA charges interest compounded daily, starting on May 1. In a situation where your income tax return is re-assessed by CRA and the reassessment results in a balance owing, CRA will backdate the interest owing to May 1. CRA charges a set rate of interest on unpaid balances – rates change every three months.
How to File Late Tax Returns in Canada
There are several methods you can use to file a late tax return:
Income tax software: Several companies offer income tax software to assist you in filing your taxes online. Visit their websites to determine whether they offer help in filing taxes for prior years. Then select the year or years for which you need to file late returns. You can fill out forms for standard deductions and calculating income tax. When your tax return is completed, file it electronically. Be sure to print a copy of your receipt as proof of filing.
Consult an Income Tax Professional: Even though the official due date for income tax is in April, income tax professionals are ready to serve you throughout the year. They have assisted other clients who need help filing late returns, and you will receive the assistance you need in a professional manner.
Use a Paper Return: Download forms and income tax guides from prior tax years from the CRA website. Once you have completed your return, mail it to the tax center listed in your income tax guide.
Always File, Even if Late
Missing the tax filing deadline is a situation where deciding to avoid your income taxes because you’re concerned about what the balance may be is not your best option. You may have to pay a late-filing penalty, however, but getting a handle on the amount you owe and making arrangements to pay it can slow down the total amount of interest accumulating on the debt. If you don’t owe a balance, you may be missing out on money due to you.
- Netfile and Telefile can only be used for your most recent year’s tax return. Also, Telefile services are only available until Sept. 30. If you are filing older returns, you must submit a paper return.
Jodee Redmond is a freelance writer, blogger and editor who has been working full-time for over 15 years. She is a graduate of Centennial College and has worked as a tax consultant and a legal assistant. Her previous experience and boundless curiosity is a distinct advantage when writing about such varied topics as income tax, insurance, commercial property, business, construction, addiction, freelance writing and more.