What if you don’t file your taxes on time?
Note: this post is sponsored by TurboTax Canada, but was written and edited by me.
Most of us have already filed our taxes. I haven’t yet, but have all my paperwork ready for this weekend. :) However, there are thousands of Canadians that will end up filing late, or not filing at all. And that’s even after the CRA extended this year’s tax deadline to May 5th!
If you don’t owe money, there won’t be a late filing penalty; you can still file later and still receive your tax refund. Not a big deal.
BUT if you owe money and file late for whatever reason, you will end up triggering penalty fees, interest payments, and you could become ineligible for certain government benefits.
Here are a few things to know if you file your taxes after the
April 30th May 5th deadline:
Interest and penalties
If you owe money on your 2014 taxes, compound daily interest is charged starting the next day after the filing deadline. Not only that, but you’ll also have to deal with a late-filing penalty of 5% of your 2014 balance owing, plus an additional 1% of your balance owing for each full month your return is late (to a maximum of 12 months).
If you happened to have been charged a late-filing penalty in one of the previous three years, your penalties may double to 10% of your 2014 balance owing, plus 2% of your 2014 balance owing for each full month your return is late, to a maximum of 20 months. Yikes!
If you owe the CRA money and something has prevented you from filing on time, or making a payment when it became due, there is a chance the penalties and interest will be waived by submitting a request. Some examples of extraordinary circumstances include:
• Natural or human-made disasters, such as a flood or fire;
• Civil disturbances or disruptions in services, such as a postal strike;
• Serious illness or accident; and
• Serious emotional or mental distress, such as death in the immediate family.
Loss of benefits
The government calculates certain benefits based on your most recent tax return filed. This means that if you haven’t filed your taxes, you will not trigger benefits you might be entitled to – such as the Canada Child Tax Benefit, Universal Child Care Benefit, Children’s Fitness Tax Credit, and the GST/HST benefit.
Don’t forget that if you are applying for a mortgage, lenders will require your most recent Notice of Assessment. If you haven’t filed your taxes, there will be no paperwork to validate your income.
So if you haven’t gotten your paperwork ready to file before the April 30th deadline, it’s in your best interest to spend some time this weekend to sort out your information. Using online tax software like TurboTax will help you figure out exactly what you owe in easy to follow steps. Remember that filing before the deadline might mean you still get charged interest on the amount owed, but at least you’ll be able to stop the late filing penalty from increasing.
Have you ever missed the tax filing deadline?
Author: Krystal Yee
I’m a personal finance blogger and marketing professional based in Vancouver. I’m a former Toronto Star (Moneyville) columnist, author of The Beginner’s Guide to Saving and Investing, and co-founder of the Canadian Personal Finance Conference. When I’m not working, you can usually find me running, climbing, playing field hockey, or plotting my next adventure.