debtcare.ca

Tag: cra penalties

  • Missed the Tax Deadline? Read Our Complete Guide to CRA Penalties and Interest

    The 2018 personal tax filing deadline was April 30, 2018. Seeing as we’re now in August, if you missed it and you owe money, you’ve likely racked up Canada Revenue Agency (CRA) penalties and interest by now.

    Late-Filing Penalties and Interest

    According to the CRA, late-filing penalties and daily compound interest start accumulating on May 1, 2018 for any unpaid amounts owing for 2017. You could be charged:

    • 5%of your 2017 balance owing, plus 1% of your balance owing for each full month your return is late, to a maximum of 12 months.
    • 10% of your 2017 balance owing, plus 2% of your 2017 balance owing for each full month your return is late, up to a maximum of 20 months, if you’ve been charged a late-filing penalty on your return for 2014, 2015, or 2016.

    The above amounts are what you could be charged after filing your tax return late. However, if you decided to not file at all, the consequences could be even worse.

    Failure to Report Income Penalty

    If you fail to report an amount on your return for 2017, and you also failed to report for 2014, 2015, or 2016, you may have to pay a federal and provincial/territorial repeated failure to report income penalty.

    Any amount of income of $500 or more that was not reported is considered a failure to report income.

    These penalties are each equal to the lesser of:

    • 10% of the amount you failed to report on your return for 2017; and
    • 50% of the difference between the understated tax (and/or overstated credits) related to the amount you failed to report and the amount of tax withheld related to the amount you failed to report.

    False Statements, Omissions, and Gross Negligence

    If you make a false statement or omission on your 2017 tax filing, you could be charged an additional penalty:

    • $100; and
    • 50% of the understated tax and/or the overstated credits related to the false statement or omission.

    This penalty can be charged whether you knew about the false statement, or if it is caused by “gross negligence,” for instance if you paid somebody else to file your return for you (like an accountant) and they made an error. Even if you pay somebody else, you are still responsible for the accuracy of your return.

    CRA Collections

    If you fail to pay an amount owing on your tax return, the CRA can begin collection action. This can be financially devastating, and publicly embarrassing. Common collection action includes a wage garnishment, a frozen bank account or putting liens on your assets.

    The CRA can begin collections without warning and without a court order. Once a collection action is in place, it becomes even harder to negotiate with the CRA. If the CRA has started collection action, time is not on your side. The only two things that can force a CRA collection action to stop (besides paying the debt in full) are filing for a consumer proposal or filing for bankruptcy.

    What to Do

    If you’re reading this blog, it’s possible that you’re several months behind on filing your tax return, or you haven’t yet paid back the amount you do owe. If this is the case, you don’t want to delay it any longer — that will just result in even more charges, CRA collections, and potential court action for tax evasion. But you don’t have to go it alone.

    You need an expert that can look at your whole financial picture and put together a plan that will work for you.

    At DebtCare Canada, we can help with your tax debt, whether it’s personal income tax, HST, or payroll. We provide access to one of the only programs that can resolve a CRA back tax problem.

    Contact us today for a free consultation. Call 1-888-890-0888.

  • CRA Penalties, Interest, and More – What to Do if You Will Miss the 2017 Tax Deadline

    The 2017 income tax deadline is nearly a month away. April 30, 2018 is the date you must file by or be subject to Canada Revenue Agency (CRA) penalties, interest, and possibly collection action.

    Tax time can be a source of stress — gathering your receipts, filing your return, and worrying about whether you’ll owe can be a hassle that’s tempting to avoid. But like it or not, paying taxes is something that can’t be avoided and if you attempt to do so, the stress and consequences will only be worse.

    Consider this case, reported on the CRA website. On December 4, 2017 a Cobourg, Ontario man was sentenced to a fine of $97,173 after pleading guilty to two counts of tax evasion for failing to report income on his personal tax returns from 2006 to 2007. This court-imposed fine is only one part of what he must pay. He also has to pay the full amount of tax owing (an additional $97,173) PLUS related interest and any penalties assessed by the CRA.

    This is a cautionary tale, but it’s also not uncommon. Between April 1, 2012 and March 31, 2017, courts have convicted 408 people for CRA tax evasion. This involved $122 million in federal tax evaded and court sentences totaling approximately $44 million in court fines and 3,103 months in jail.

    If you’re worried you’ll miss the 2017 income tax deadline, here’s what to do instead:

    1. File Before April 30, 2018

    If you’re owed money and you don’t file before the 2017 income tax deadline, you’ll just have to wait longer for your refund — and who wants that? Even if you’ll owe a tax debt, it’s better to file before the deadline to avoid CRA penalties.

    Interest begins accumulating on your tax debt on May 1, 2018 at a daily compounded rate. And on top of the interest, you’ll have to pay the CRA late-filing penalty.

    The CRA late-filing penalty is 5% of your 2017 balance owing, plus 1% of your balance owing for each full month your return is late to a maximum of 12 months. And if you’ve been charged a late-filing penalty in a previous year, you could be charged 10% of your balance owing, plus 2% for each full month your return is late for up to 20 months. That’s a lot of extra money to pay on top of the balance you already owe. It’s in your best interest to file by April 30 and avoid the CRA penalties.

    1. Make a Plan to Pay

    If you can afford it, paying your tax debt in full is the best option for avoiding CRA penalties. Look at your budget and see where you can save to pay the tax debt.

    If you absolutely can’t pay in full with your current income, you may have other options available to you. For example, if you own a home with equity available and have good credit, you could be eligible for a home equity loan, which would allow you to pay off your tax debt and then pay your loan off over a fixed repayment schedule. If you don’t own a home, or don’t have equity available, there could be other lending options that you can access.

    Don’t share your income and expenses with CRA. Get a plan together first.

    1. Seek Professional Help

    If you’re going to miss the 2017 income tax deadline because you can’t pay your tax debt, even with a loan, consult a financial professional. Debt counsellors can help you go over your options, see what options are available to you, and help prevent or stop CRA collection action. Burying your head in the sand isn’t going to change your situation and will actually make it worse. If you’re not sure what to do, a professional debt consultant can help you find the way.

    DebtCare Canada can help you avoid the consequences of CRA penalties.

    Call us for a free consultation at 1-888-890-0888 or visit us online at www.debtcare.ca.

  • The Taxman Taketh Away: How to Reduce Crippling CRA Penalties

    CRA penalties and interest can be crippling and even double the size of a tax debt. We’ve all heard horror stories about the CRA and its efforts to enforce repayment. If you are facing Canada Revenue Agency (CRA) penalties, then you need to determine how you are going to reduce that burden in a way that works for you, not the CRA.

    Yes, the CRA does offer some programs that remove penalties and interest, such as:

    1. The Taxpayer Relief Program – intended to provide relief of penalties and interest to those who can prove that an extraordinary circumstance led to their tax problem.
    2. The Voluntary Disclosure Program – offers a second chance to change a tax return you previously filed or to file a return that you should have filed.

    Keep in mind that these are complicated programs to apply for. Furthermore, where relief is concerned, it is difficult to get CRA approval for even partial relief of penalties and interest.

    Even if CRA agrees to cancel some or all your penalties and interest, you will still be left with a tax debt. Plus, the CRA never makes settlements on tax principal.The only question at this point is: can you pay the tax debt? If you can, then pay it.

    If you cannot, then the problem is a much bigger one.The CRA will collect one way or another, there is no way around that fact.

    The only way that you can get rid of CRA penalties, interest, and potentially reduce the principal tax debt you owe is through a consumer proposal or bankruptcy. Both will also protect you from disastrous enforcement action or stop it if it has already been put in place.

    When exploring either option, keep in mind that consumer proposals and bankruptcies must be administered by a Licensed Insolvency Trustee (LIT). Why is this important? Because LITs do not represent you. They represent your creditors, and therefore will be doing everything they can to collect the most for the creditors. Once you share your personal and financial information with an LIT, they may be able to find ways to go after more of your money and assets.

    Protect yourself and your information by always seeking out your own professional financial advice to explore all your options before going to a LIT.

    At DebtCare, we want to help you become debt free.

    Get in touch to discuss the best option for you by calling 1-888-890-0888.