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Clients often get anxious about tax filing deadlines and the possibilities of what that means in the eyes of the Canada Revenue Agency. When that happens, many clients adopt a “head in the sand” position and choose to ignore filing deadlines. As we know from experience, sooner or later, we must face up to the reality of the situation and tackle it head-on.

Let’s take a look at filing deadlines and what happens if those deadlines are not adhered to.

PERSONAL T1 RETURNS – Individuals with Employment Income

Filing Deadline: April 30th (midnight)

If April 30th falls on a Saturday or Sunday, then the deadline shifts to the following Monday. If you are mailing in your return, it must be postmarked prior to this deadline. You can also submit your return electronically via a tax preparer or home tax software program. Additionally, you can always drop off your return at a local CRA office: http://www.cra-arc.gc.ca/cntct/tso-bsf-eng.html .

Missed Deadline
If you are owed a refund from CRA, you can file your return anytime — there is no penalty for late filing. If, on the other hand, you owe CRA money, then you will pay a late filing penalty (5% of the balance owing + 1% of the balance owing for each full month that the return is late up to a maximum of 12 months) . If you have been charged a late filing penalty in any of the preceding three years, the late filing penalty may be 10% of the balance owing + 2% per month. Interest is also charged on the balance owing and that rate is determined by CRA every three month. Currently, the rate is 5% of the amount owed per year.

Payment Options
Any outstanding balances owed to CRA can be paid in a number of ways:

a) Online Payment – To pay online, you need to add the CRA to your list of creditors (using your SIN as your account number) through your online banking program. Simply pay it as you would any other bill online.

b) Payment at a Canadian Financial Institute – To pay at a bank, simply make out a cheque for the amount owing to Receiver General. Be sure to put you SIN on the back of the cheque and indicate in the note section the year for which the payment is for (ie. 2013 Taxes). You will need to include a payment form with your cheque which can be requested via the My Account section of the CRA website or via phone 1-800-959-8281. Additionally, your tax preparer should be able to provide the payment form to you. The other option is to wait for your Notice of Assessment (NOA) to arrive (usually 10-14 business days after filing your return) as a payment form will be included with it.

PERSONAL T1 RETURNS – Individuals with Self-Employment Income or Spouses of Individuals with Self Employment Income

Filing Deadline: June 15th (midnight)

If June 15th falls on a Saturday or Sunday, then the deadline shifts to the following Monday. If you are mailing in your return, it must be postmarked prior to this deadline. You can also submit your return electronically via a tax preparer or home tax software program. Additionally, you can always drop off your return at a local CRA office: http://www.cra-arc.gc.ca/cntct/tso-bsf-eng.html .

NOTE:  if you have a balance owing, the payment deadline is still April 30th. 

Missed Deadline / Payment Options

As above.

PERSONAL INSTALLMENTS

Installments are periodic tax payments made to the CRA for income earned during the year.  This situation arises when you are earning income without tax being withheld at the source (ie. rental income, investment income or self employment income).  You have to pay installments if your net tax owing is over $3000 in 2014 and in either 2013 or 2012.

Installments are due four times during the year: March 15th, June 15th, September 15th and December 15th.  If any of those dates fall on a Saturday, Sunday or holiday, then they are due by the first business day following the payment date.  Installments can be made via your financial institution, online or by mailing in a cheque or post-dated cheques to the CRA.

 Missed Deadlines

CRA charges a penalty & interest for missed installment payments or any payments that are less than the required amount.  Actual amounts of the penalties and interest vary depending on your situation.  For more information, visit www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/pymnts/nstlmnts/ntrst-eng.html.

The April 30th tax filing deadline for individuals has long since passed, along with the June 15th filing deadline for those individuals with self-employment income.  Although, it’s somewhat surprising how many people put off getting their taxes organized and filed on time, the reality is, that it is a pretty common occurrence.

For those of you who are procrastinating, here are a few reasons to get moving:

1)  GOVERNMENT PAYMENTS WILL BE DELAYED

Your net income for the previous year determines your government payments for the next year.  By not filing your 2012 return on time, you delay your Child Tax Benefit Payments, Ontario Trillium Benefit, Old Age Security Payments + HST Credits.  These payments are typically paid out starting July and run through to the following June.  Additionally, if you qualify for drug subsidies, you need to file to maintain this benefit.

2)  LATE FILING PENALTIES

If you file your tax return late and you owe money, the CRA will charge you a late filing penalty that is 5% of the balance owing + 1% of the balance owing for each month that the return is late.  If you have filed your return late in the preceding three years, the penalties increase for being a repeat offender: 10% of the balance owing + 2% of the balance owing for each month the return is late. 

3) INTEREST

Along with the late filing penalties, CRA also charges you interest on the unpaid balance.  Starting May 1st, you will be charged compound interest daily on the balance owing.  The interest rate varies depending on the CRA’s prescribed interest rates, which are determined quarterly.  Currently, the rate is set at 5%.

Although this sound quite alarming, don’t panic.  If, for example, you are filing your 2013 return on June 30th and have a balance owing of $1000, the interest owed would only total $8.33.  Although the interest penalty can add up, it is really the late filing penalty that is the more aggressive charge and can multiple in a hurry.  Our advice, get your return filed ASAP — even if you do not have the money to pay the balance owing, the late filing penalty is immediately halted which will save you of money.

4) REFUND

Chances are, that if you typically get a refund, and, if you income situation has not drastically change since you last file, you will likely be getting a refund.  Our experience indicated that if the CRA thinks that you owe them money, they will send you a Demand to File Notice — if they think that they owe you money, you are not likely to hear from them.  In this case, no news is usually good news!

Whatever the situation, the best course of action is to get your return(s) filed.  If you’re getting a refund, that’s money in your pocket; if you owe, filing your return will halt the late filing penalty and that, too, is money in your pocket!  Don’t delay … call us and book an appointment to come and get your taxes organized.