Rethinking Needed on Tax Filing Late Strategies

Filing taxes on time is a good habit that not everyone likes to keep. Some are not so concerned with filing their taxes on time for the reason that they have already been behind with tax filing late for the previous years. People in this category have to rethink their strategy on tax filing.

Tax filing late is like going down a slippery slope and it could turn into a snowball situation. It has been observed that those who have been hit the hardest with tax problems due to filing late are the owners of small business enterprises. This kind of situation occurs when the owners of small business enterprises are ignorant of giving importance to proper maintenance of accounts and records so that there is not much of a problem at the time of filing the tax returns.

In other cases, the owners do not have the money simply to hire tax accountants or pay the tax amounts. They like to take up the responsibility of tax returns themselves and find the going tough and challenging. It results in inability to pay the taxes on time.

Small business owners occasionally spend trust amounts like the GST/HST and they turn their backs to tax filing for the simple reason that they will be forced into repaying the money. The owners are well aware that they owe the amount but do not have the means to cover those payments.

It has to be understood that it is not illegal to owe tax amounts to the CRA, but it is indeed illegal to do your tax filing late. As in the case of all other problems, the tax difficulties will not vanish by themselves; in fact, they will continue to pile up over a period of time.

The common fine or penalty that is levied by the CRA to penalise an individual or a company for tax filing late is the financial penalty. When the tax returns are filed late, the people concerned will be subject to penalties and these fines will grow with time and on every repeat of that offence. To give an example, if the first year of tax filing late was 2010 and the successive couple of years also involved late filing of taxes, the penalty for late filing would be assessed in 2010 and it would be greater in the following years. Interest will also be accumulated on this overall tax debt.

Some individuals feel that if they do not file their tax returns, they may buy themselves some extra time to cook up a plan to settle the tax arrears. It does not work this way. Over a period of time, their employers will be filing the tax slips and the clients will be filing their T4A income tabs or they may even declare the income that was paid to you as expense items, giving CRA the opportunity to get an estimate of your earnings during the financial year. It is not at all difficult for the CRA to get a notional assessment done for an individual. This is an estimate of what the CRA feels is the income earned by an individual and they can work out the corresponding debt in terms of taxes, penalties and interest for that particular individual.