Late Tax Filing
Late tax filing can lead to major CRA tax problems including interest And penalties on taxes owed. Address your tax debt today by having our tax dispute experts fight the CRA for you. Contact Us Today!
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Filing Taxes Late in Canada
Most Canadians need to file tax returns every year. However, many Canadians fall behind filing tax returns for a variety of reasons; people:
- Don’t think that they will owe, so they don’t file
- Know they will owe and don’t have the funds to pay
- Incorrectly believe that if they do not file they will not be found out and will not have to pay
- Have lost records and/or receipts and have no idea what they earned and don’t have the ability to estimate or prove what their expenses were
- Find dealing with their late tax filing so stressful once it has occurred that they think if they avoid it, eventually it will go away by itself
You may be wondering what happens if you don’t file your taxes in Canada or what happens if you file your taxes late. These two are different situations and the consequences of both are different. Not filing taxes when you are required to file them can be considered a crime, so it’s critical to file your returns, even if they are late and even if you cannot afford to pay your taxes.
What Happens if You Don’t File your Taxes in Canada?
Not filing a tax return = tax evasion = crime.
Each day that you are behind filing your returns, you are essentially committing tax evasion. It is not against the law to have a tax debt and owe money to the CRA (Canada Revenue Agency). It is against the law to not file your tax returns.
In addition, the longer you wait and the longer your late tax filing is outstanding, the more you will accrue large penalties and interest and can even be subject to prosecution.
If you are not filing, the CRA can complete a Notional or Arbitrary Assessment on your behalf and estimate your income, expenses, and other amounts. It can then use this assessment to calculate how much tax you owe. When completing a Notational Assessment, the CRA will look at any information and make (often wild) assumptions. On that basis they can assess your tax debt, interest and penalties, and then proceed to collect the tax debt that they have estimated.
What Happens if you File your Taxes Late?
Late tax filing is also a serious issue and should never be left unaddressed. The CRA charges significant penalties and interest charges so the penalty for filing taxes late can be significant if you owe a lot of money or if you have waited a very long time to file.
Late Tax Return Penalty
What happens if you file your taxes late is that the CRA can charge a late filing penalty. If you have a balance owing and do not pay it, the CRA will charge compound daily interest on any unpaid amount starting on the day after your return is due. In most years, this is May 1st, as tax returns for most people are typically due on April 30th. In addition, as a penalty for filing taxes late Canada Revenue Agency will charge a late tax return penalty.
The penalty for filing taxes late is 5% of the tax year’s balance owing plus 1% of the balance owing for each full month your return is late, up to a maximum of 12 months. If you were charged a late tax filing penalty in any of the three previous years and in the most recent year, the penalty may be increased to 10% of the balance owing plus 2% for each full month the return is late, up to a maximum of 20 months. As you can see, these penalties can be very costly, especially if you have a large tax debt to begin with. This means that you could potentially owe up to 50% of your tax debt in penalties.
How Far Back Can You File Taxes Canada?
Whether your late tax filing is 1 year, 5 years or even 10 years past due, it is important to take action and get compliant immediately. You might think that, if you don’t have the money to pay your taxes, it’s best to not file, but this isn’t the correct strategy to take. The CRA will not forget about you, and every day that goes by will end up costing you more money.
In fact, you should still file your taxes even if you do not owe any money. Filing taxes late when you don’t owe Canada Revenue Agency any money is still a mistake. Many benefits (such as the Canada Child Benefit) will not be paid to you if you do not file.
If you’re behind filing your returns you should not simply go to a tax preparer and send in a batch of returns. Once you are behind, you will need to deal with professionals who have a high level of experience and who can negotiate with the CRA for you to become compliant. Late tax filing is a very serious tax problem that must be approached carefully.
If you are considering filing past tax returns, the Canada Revenue Agency has a program that may help you. The Voluntary Disclosure Program (VDP) is designed as a “second chance” for those who did not file taxes accurately when they should have. If you apply to the VDP and your application is accepted, the CRA could grant you with relief from prosecution and the agency may reduce or eliminate the penalties that you will be required to pay. However, your disclosure must be voluntary. This means that you will need to come forward before the CRA contacts you about filing taxes late. You will also need to provide complete information.
If you are behind filing your tax returns and need help, please click here to contact us now. Communicating with the CRA must be done very carefully and it is critical that your VDP application is completed accurately. Failure to do so could result in the CRA receiving information about your tax situation that it doesn’t already know, but not agreeing to waive penalties or possible prosecution. Our experienced tax professionals understand what it takes to negotiate and communicate with the CRA. If we determine that the best route for you to take is to apply for the Voluntary Disclosure Program, our team will help you prepare your application in a manner that gives you the best possible chance of it being accepted.
Farber Tax Solutions can help you successfully deal with CRA problems. We utilize the experience of our tax experts to:
- 1| Offer a comprehensive solution that is focused on achieving the most favorable possible outcome for your tax issue;
- 2| Communicate with the CRA on your behalf and navigate the entire CRA dispute process; and
- 3| Offer a complete solution to your tax problems, including ex-CRA professionals in affiliation with tax lawyers from Farber Tax Law.