With the tax filing deadline fast approaching, many Canadians who know that a tax debt is likely headed their way may be considering holding off filing. This is sometimes done in the hopes of finding the financial resources to pay the tax debt before the Canada Revenue Agency is made aware of it, or with the intention of holding off to keep CRA enforcement action from being levied.
While we can appreciate the stress that comes with having a tax debt, we urge you to reconsider this tactic. The fear of a looming tax debt should never keep you from filing.
Why? First and foremost, owing money to the CRA is not illegal. Failing to file your taxes is. Thousands of ordinary Canadians are prosecuted each and every year for this, and once this happens a tax debt may just be the least of your worries. That knowledge alone should entice you to file on time.
The second reason is penalties. If you owe tax for 2016 and don’t file your return on time, the CRA will charge you a late-filing penalty. This penalty is 5% of your 2016 balance owing, plus 1% of your balance owing for each full month your return is late, to a maximum of 12 months. In addition, if you filed late in 2013, 2014 or 2015 and were charged a late-filing penalty, your 2016 penalty may increase to 10% of your 2016 balance owing, plus 2% of your 2016 balance owing for each full month your return is late, to a maximum of 20 months. This can result in an amount owed which quickly surpasses that of the original tax debt.
Furthermore, no matter how long you wait, you will still have a tax debt when you file, and since interest is applied retroactively, not filing doesn’t actually save you any money.
Finally, the CRA notionally assessing you (realizing you haven’t filed and filing on your behalf) is always a very real possibility, and this can and often will result in a larger debt than you would otherwise have received had you filed on time voluntarily.
When it comes to late filing, there really is no scenario in which you come out the winner.
At Tax Solutions Canada, we can help you conquer your fear of a tax debt and help you find the best solution. Call us today at 1 888-868-1400.