As the summer winds down and we are greeted by the emergence of fall, filing your taxes may be the farthest thing from your mind. For those individuals who remain tax compliant year in and year out, once the returns are filed and the assessments returned taxes are usually forgotten about until the following spring.
What about those individuals who missed the tax deadline? Out of sight, out of mind right? Not so much. The Canada Revenue Agency has the power and resources on hand to uncover those late filers – and they do. For example, a recent CRA conviction saw Tuccio Zita, a Mississauga landscaper, convicted of failing to file both a corporate tax return and a GST return, resulting in a fine for each offence.
How does the CRA find out about non-compliant taxpayers? There are several ways. The CRA Snitch Line that individuals can call to report non-compliance, is quickly becoming an important avenue for discovery for the CRA. For example, angry ex-wives/husbands, jealous competitors, etc. Also, if clients receiving receipts then file those as part of their own individual returns, these can come back to haunt the owner of a business. There are various other methods, but the important thing to remember here is that if you have not filed, it IS just a matter of time.
What happens if you are caught not filing your tax returns? This is an example of the penalties:
– If you failed to file your 2012 tax return, the CRA will apply a 5% penalty to the amount that you owe, plus an additional 1% per month for up to 12 months.
– If you have missed the deadline several years in a row, this penalty may jump to 10% plus 2% per month for up to 20 months.
– Interest – don’t forget about this. The numbers above are just penalties, and once the debt has been applied you will be charged daily compound interest on both the tax debt owed and the penalties.
– If you miss the tax deadline two or more times over a four year period you may find yourself saddled with a ‘repeated failure to report income’ penalty, to the tune of 20% of the total income that was earned but not reported.
These fines are stiff, but you are not without options. If you know that you have missed the 2013 tax deadline and are hoping that the problem will just fix itself by next tax season, beware. If the CRA catches up with you (as it did with Mr. Zita) your options are sharply reduced. Please speak with a professional tax expert about the Voluntary Disclosure Program. If you have not yet been contacted by the CRA the VDP can help get you relief from interest and penalties. Keep in mind that the process is complex and you only have one chance – so it needs to be done right the very first time.
If you have missed the tax deadline, don’t avoid the issue. Tax evasion is a very real issue, and if you are facing this charge it may be a long road ahead. Instead, stop it before it starts.
For more information about what to do if you have missed the tax deadline, or for helping dealing with your tax problem or tax debt, please contact Tax Solutions Canada today at 1-888-868-1400.