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Tag: late filing penalties

  • CRA Tax Consequences: Late Filing Penalties

    The Canada Revenue Agency timeline requirements which all taxpayers must abide by are well known. As a Canadian, you are required to file your income taxes by a certain date each year, and failing to file on time can result in penalties and interest assessed, often inflating a tax balance owing by an overwhelming amount.

    For income tax returns, possible CRA late filing penalties and interest include:

    Late-filing penalty: If you owe a tax debt and don’t file your return on time, you will be charged a late-filing penalty. Currently, the penalty is 5% of the balance owing, plus 1% of your balance owing for each full month your return is late, to a maximum of 12 months. If you have repeatedly filed late, the late-filing penalty may increase to 10% of your balance owing, plus 2% of your balance owing for each full month your return is late, to a maximum of 20 months.

    Interest: If you have an unpaid balance, you will be charged compound daily interest on that amount. You will also be charged interest on any penalties charged. The rate of interest charged by the CRA can change every three months.  Interest rates are published on the CRA’s website.

    In addition, if you continually fail to file on time, or have failed to report income in previous years, you may be subject to additional penalties.

    Repeated failure to report income penalty: If you fail to report an amount on your return (whether intentionally or in error), and you also failed to report an amount in any of the previous three years’ returns, you may have to pay a federal and provincial/territorial repeated failure to report income penalty. The federal and provincial/territorial penalties are each 10% of the amount that you failed to report on your current return.

    It is easy to see how that tax debt can quickly grow after adding in penalties and interest, isn’t it?

    Just wait – these penalties, while significant, may not be the only ones you face due to late filing. While owing a tax debt is not illegal, failing to file is considered tax evasion and you can be prosecuted. Don’t think that can happen to you? Just check out the countless average Canadians prosecuted every day: http://www.cra-arc.gc.ca/nwsrm/cnvctns/menu-eng.html.

    Wait, there’s even more! If the CRA thinks that you have been negligent, gross negligence penalties equal to up to 50% of the tax debt may also be added.

    Knowing that a large tax debt will be on file once you’ve filed can be stressful, but if you’re considering not filing to avoid it this is the worst thing you can do.

    A tax debt is not a legal problem – it is a financial one. This means that you will need a financial plan to resolve it. There are financial solutions for dealing with a tax debt – even if it appears that you have no way to pay the debt. Get serious about your tax debt and seek help. Even with a large tax debt, the best course of action is to speak with a professional who understands the problem and can offer real solutions.

    At DebtCare, we have years of experience dealing with tax debts. We can help you find a way to pay it off, as soon as possible.

    Get in touch today: 1-888-890-0888.

     

     

  • Tax Return Going to Result in Tax Debt? What Can You Do If You Can’t Pay

    Tax DebtThe tax deadline is upon us, and for many this means a necessary hassle we must face annually – but once dealt with, is quickly relegated to the back of our minds until this time next year. For others however, those with a tax debt looming over their heads, tax time brings with it some serious stressors.

    As we hope you are aware, the tax deadline this year for personal income tax returns is April 30th. If you have everything in before this date, that’s great, especially if you don’t owe anything. However, if you have yet to file, and think you might owe, it might be prudent to consider the late filing penalties and how they can impact your tax debt – it might just be enough to motivate you to get your filing done.

    2013 late filing penalties:

    • If you owe for 2013, and do not file by April 30th, you will be charged a late filing penalty of 5% of your 2013 balance, plus 1% of the balance owing for each full month your return is late (to a maximum of 12 months).
    • If you were charged a late filing penalty for 2010, 2011, or 2012, your late filing penalty can increase to 10% of your 2013 balance, plus 2% of the balance for each full month (to a maximum of 20 months).

    These penalties are steep – and no one wants to get saddled with a major tax debt, plus interest – but what if you can’t pay? If you are thinking about just ignoring that debt, hoping that by not filing the CRA won’t catch on and you’ll be spared the financial strain – think again. The consequences of not filing may mean a notional assessment, where the CRA will estimate your annual income and charge you what they feel you owe based on their findings. Continued failure to pay a tax debt can result in enforcement action, including wage garnishments, frozen bank accounts, even property liens.

    So what can you do? If you have filed and owe, or if you have yet to file because you are afraid that you will owe, know that you have options. Don’t ignore that tax debt in the hope that it will go away. Speak to a debt solutions specialist to find out about all of the options available to you to get rid of that tax debt once and for all.

    For more information about dealing with a tax debt please contact DebtCare Canada today by calling 1-888-890-0888.