The Canada Revenue Agency (CRA) has many requirements which all taxpayers (individuals and companies) must abide by. There are deadlines and due dates for filing income tax and GST/HST returns. There are due dates for payments to the CRA, both for balances owing and for instalments. There is the requirement that all returns must report accurate and complete information. Failure to comply with any of these requirements will almost certainly result in penalties and interest assessed, often inflating a tax balance owing to a shockingly increased amount.
For income tax returns, possible CRA interest and penalties include:
Interest: If you have an unpaid balance, you will be charged compound daily interest. 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.
Late-filing penalty: If you owe tax and do not 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.
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.
False statements or omissions penalty: If the CRA believes you were negligent, or knowingly made a false statement or omission on your tax return, you may be charged a penalty equal to the greater of:
- $100; and
- 50% of the understated tax and/or the overstated credits related to the false statement or omission.
For GST/HST returns, the CRA charges interest on:
- any overdue balance owing on a return;
- late or insufficient instalment payments; and
- any other overdue GST/HST amount that you have to remit to the Receiver General
For GST/HST returns, the CRA has a number of different penalties that may be charged for a variety of circumstances, including:
- Failure to file (for any return with a balance owing, which is filed late)
- Failure to file after receiving a Demand to File
- Failure to file electronically
- Failure to accurately report information
There are instances where taxpayers may qualify to have penalties and interest reduced, or completely eliminated by the CRA. Speak with a qualified professional at Tax Solutions Canada to learn more: 1-888-868-1400.