The CRA Late Filing Penalty And Other Types of Penalties

The Canada Revenue Agency will not sympathize with you in every circumstance. If you have not filed your taxes returns for current year or previous years, for instance, the CRA demands to know why you have not. If your reasons are acceptable, the CRA might waive your penalty or interest amounts. It is not known to write-off unpaid taxes though. You will be required to pay your CRA late filing penalty if your Taxpayer Relief Application is rejected after a few months of thorough assessment.

The CRA late filing penalty can vary based on whether you normally report personal taxes or corporate taxes. In addition, repeated failure to file your tax return on time could cause a given form of penalty: the repeated failure to report income penalty. It is imposed on the taxpayer by the federal and provincial administrations (Quebec residents are exempted from the provincial/territorial penalty). You will be charged for this penalty if you failed to pay your current year taxes and you also did not report your taxes for three prior years. The federal and provincial or territorial government will each charge you ten percent of the unsettled amount for current year or any other previous year.

But the CRA also states that if you come out willingly and speak up about your undisclosed income it could cancel your CRA late filing penalty. If you are a non-resident of Canada, the CRA will demand the penalty for repeated failure to report income only if you are eligible to pay provincial or territorial taxes.

Another penalty that is different from the CRA late filing penalty is called the false statements or omissions penalty. If you submitted your most recent tax return for current year with omissions or false statements, you will be punished via a gross negligence penalty. You be charged a fine equal to the greater of one hundred dollars or fifty percent of the overstated or understated tax.

The penalty can be waived or cancelled however, as long as you can admit your mistake via the Voluntary Disclosures Program. If you run a big corporation, it should always file its T2 Corporation Income Tax Return on time. Failure to do so could trigger a penalty that will be applied to each month that you file your returns late for up to forty months. The CRA late filing penalty may apply if your company fails to file its Schedule 38, Part VI Tax (if applicable). The page 2 of the T2 return contains a line (line 233) that can help you identify your company as a large corporation.

If a corporation fails to report a given amount of income for a given tax year, and any of the previous three years, the CRA’s penalty for this one is ten percent of the undeclared income in that tax year. You may refer to subsection 163(1) of the Income Tax Act. There is a severe penalty that will apply if a third party assists another person in compiling and filing a false tax return or with full knowledge lets a taxpayer submit counterfeit tax data. There are other forms of penalties that will apply, including non-resident corporations, installment, failure to file penalties and failure to comply with the mandatory online-based tax return filing process.