Filing taxes late: There’s a high cost
Thousands of Canadians file their taxes late. Be prepared to pay hefty penalties and to lose some government benefits if you do.
Millions of Canadians filed their tax returns before the April 30th deadline, but there are thousands that end up filing late, or not filing at all.
If you do not owe money, there is no late filing penalty. You will still be able to file later and still receive your tax refund. However, if you owe money and file late for whatever reason, you will end up triggering penalty fees, face interest payments and become ineligible for certain government benefits.
Here are few things to know if you’ve filed your taxes late:
Interest and penalties
There are two different kinds of penalties levied by the the Canada Revenue Agency (CRA).
There are late filing penalties when you owe taxes and don’t file your return on time. The penalty is 5 per cent of the amount owed, plus an additional 1 per cent of the balance owing for each month that your return is late – to a maximum of 12 months.
For example, if you owe $2,500 and file six months late, you will be charged 11 per cent – or $275.
On top of the late filing penalty, you will also be charged interest on any amount owed. Interest is compounded daily, and interest rates can change every 3 months.
If you filed a late return this year, and you were also charged a late-filing penalty in one of the previous three years, your late-filing penalties will double. The CRA will charge a penalty of 10 per cent of the taxes you owe, plus an additional two per cent for each full month that your return is late, up to a maximum of 20 months.
News Source: theStar.com
CRA’s Hefty Late Filing Penalties
First time late filing penalty: if you owe tax and do not file your return on time, CRA will charge you a late-filing penalty. The penalty is 5% of your tax balance owing, plus 1% of your balance owing for each full month that your return is late, to a maximum of 12 months. In another word, if you have late tax unfiled, for the very first year, you will have 17% of tax owing for the penalties alone.
Repeating late filing penalty: if the late filing is a re-occurring event within three years, then the penalties become nearly tripled. The late-filing penalty becomes 10% of your tax balance owing, plus 2% of your tax balance owing for each full month that your return is late, to a maximum of 20 months. That is a late filing penalty of 50% of your tax owing.
The Compounded Daily Interests
In addition to the late filing penalties, CRA charges much higher interest than banks on your tax balance and penalties. The interest is compounded DAILY. Use rule of thumb, if assumed interest is 7%, which is not abnormal for CRA for many years, then tax owing doubles in about ten years. When the interest is compounded daily, the interest keeps running when you sleep.
What You Need to Do Now is to stop procrasnating, start taking actions. You can not afford to wait any longer!
What We Can Do to Help You
To control your damage right away, we will do a quick, sometimes, on the spot assessment, if you have unfiled taxes for years and you do not owe taxes. Then we will quickly help you to reconstruct all the financial information and locate all your missing pieces of tax information to report your tax returns properly.
If we determine that you have unfiled back taxes and large tax debts owing for many years and thus the interests and late filing penalties are alarmingly high. Then we may need to help you to file under the Voluntary Disclosure Program or Tax Amnesty immediately to avoid the risk of being caught by CRA and thus lose the opportunity to file under the protective Voluntary Disclosure Program to reduce the severe damage. The penalties alone may force you into bankruptcy.
Why You Should Work with Tax 911 Now
Unlike these accountants or the tax filers with seasonal appearance in the malls, we can not only fix your back tax problem, we can also help you to negotiate with CRA for the matters before and after the filing.
Before the filing, we can help you to file Tax Amnesty program to completely remove your penalties and/or some of the interests.
After the tax filing, if CRA challenge you or audit you, we have the expertise to represent you and fight for you on the returns;
If the tax bill is too high, then we can negotiate a tax relief for you to reduce the tax penalties and interest, or we can help you to negotiate an affordable payment plan so no legal collection actions will be taken against you by CRA.
We are different because we can provide much more comprehensive services to protect you in many aspects and all stages of your tax dealing with CRA.
Our Unlimited Free Consultation & Service Guarantee
To begin with, we offer RISK FREE no obligation initial consultation just to help you to understand the depth and complexity of your tax problems. We will also provide you the recommended steps to take to fix your tax problems. Then it is completely up to you to decide what to do from there.
If you do decide to engage us to fix your tax problems, we will provide price match guarantee within the entire tax negotiation industry.