Tax Tips

Tax Day is May 5th. Avoid Costly Tax Filing Penalties!

Don’t be late for this very important date.  The filing deadline for 2013 income taxes have been extended, but it’s still critical to get your taxes in on time to avoid late filing as the penalties can be financially costly.

As a result of the shutdown at the Canadian Revenue Agency (CRA) last week in response to the Heartbleed virus attack, the deadline for filing your Canadian 2013 income taxes has been extended to May 5, 2014.

However, filing your income tax return late can be extremely costly. If you owe income tax and file your income tax return late, the CRA will charge you a penalty and also charge interest on the unpaid amount.  We always advise that even if you are missing information, file on time anyway to avoid penalties. You can file changes to your income tax return later.

Penalties for filing your return late

If you owe income tax and file your tax return after the deadline, the CRA will charge a penalty of

  • 5% of the balance owing and
  • 1%  of the balance owing for each full month that your return is late, to a maximum of 12 months.

If you were charged a late-filing penalty in one of the previous three years and are late filing your income taxes again, the CRA will charge a penalty of

  • 10% of the balance owing for the current year and
  • 2%  of the balance owing for each full month that your current income tax return is late, to a maximum of 20 months.

Interest Charges for paying your taxes late

In addition to the penalty for filing your Canadian income taxes late, the CRA will also charge compound daily interest

  • on any unpaid amounts owing for 2013, starting May 6, 2014 and
  • on any penalties charged, starting the day after your return is due.

The interest rates charged can change every three months.

Waivers of Tax Penalties and Interest

In cases of unusual or extenuating circumstances, or in situations where information is missing from tax returns through oversight or error, there are two ways to obtain help.  There is a Taxpayer Relief division that will consider the reasons tax returns were not filed or taxes were not paid.  The Taxpayer Relief division also deals with matters of financial hardship. Taxpayer Relief is usually requested by completing an application and providing supporting documentation such as medical records and financial detail.

There is also a Voluntary Disclosure Program to assist taxpayers in reporting previously unreported information.  There are specific criteria under this program, but if successful, can result in a complete waiver of penalties.

We’ll go into more detail about both of these relief measures in our next newsletter.  If you think you might qualify for one of these programs, please contact one of our Partners.

Jerry Paskowitz is a Partner with Sloan Partners with over 30 years experience in all tax and financial matters. Contact Jerry for an appointment to discuss tax savings opportunities for your business. 

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