Late Tax Filing
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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.
If you’re curious how to file a late tax return Canada or how filing past tax returns Canada is possible, we can help. The team at Farber Tax Solutions has years of experience in resolving tax problems. We’re the trusted experts that can assist you with your tax issue.
What Happens if You Don’t File your Taxes in Canada?
If you are required to file a tax return, you must do so by law. It isn’t a crime to owe tax debt, but it is a crime to not file taxes if you are required to do so. Most Canadians are required to file income taxes every year.
Not filing a tax return = tax evasion = crime.
Each day that you are behind filing your returns, you could be considered to essentially be committing tax evasion. Tax evasion is a situation where an individual or a business intentionally ignores Canadian tax law. By not filing income taxes when they are due, you are ignoring Canadian tax law and the Canada Revenue Agency could consider this to be an intentional attempt to evade taxes. There are significant penalties for tax evasion, including fingerprinting, court-imposed fines, prison time, and a possible criminal record. This can damage your reputation and your future.
As mentioned, 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.
Even if the CRA does not seek tax evasion charges against you, there are still possible ways that you can be hurt by filing taxes late in Canada. The CRA can charge significant late-filing penalties as well as interest charges on the tax debt that you owe. The longer you wait and the longer your late tax filing is outstanding, the more you will accrue large penalties and interest. You could even be subject to prosecution.
If you repeatedly file your taxes late (or not file them at all) these penalties will increase. This will make it incredibly difficult to pay the CRA what you owe and put significant stress on your budget.
Even if you cannot afford to pay your tax debt, you should still try to file on time so that you can avoid penalties.
Some people are under the mistaken belief that they can avoid filing their taxes and the CRA will not know that they owe money. This is untrue. The reality is that the CRA is a very large and powerful organization. While it may not contact you immediately if you do not file your income tax returns on time, the agency will eventually discover that there is an issue. The CRA has very strong powers and once it knows that you are behind on your returns, it will use these powers to collect what it is owed.
If you do not file, 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.
No one wants this to happen, so the easiest course of action is to file your returns when they are due.
What Happens if you File your Taxes Late?
The Canada Revenue Agency is a very powerful agency. The federal government has given the CRA the ability to administer tax laws for the Government of Canada and most provinces and territories. The Canadian tax system is based on self-assessment and mandatory compliance. This means that every taxpayer is required to file their returns on time. Residents of Canada must file an income tax return every year and even non-residents may have to file a tax return under certain circumstances.
Late tax filing is a serious issue and should never be left unaddressed. The CRA charges significant penalties and interest charges. These charges continue to increase the longer you go without filing your returns, so if you owe a lot of money or if you have waited a very long time to file, the penalty for filing taxes late can be quite significant.
Most taxpayers are required to file their returns on April 30th of each year. Self-employed individuals have until June 15th to file, but if they have a balance owing it must be paid by April 30th to avoid interest charges.
If you do not file your taxes by the deadline, the CRA immediately charges a penalty on May 1st as well as compound daily interest charges on any unpaid taxes. Even if you do not owe money, you could still be hit financially if you do not file your taxes. The CRA will withhold your refund until you file and, even if you are not expecting a refund, there will likely be a delay in any government benefits you are expecting (such as GST/HST benefits or child benefits).
If you do not file your tax return on time, you may be wondering how to file late tax returns. If the return is less than a year old, the solution is simple: you can file your return as you usually would. Simply complete your taxes and mail them in. If you owe tax or if you are charged a penalty by the CRA for late tax filing, you will be notified. If you would rather file your returns online, NETFILE remains open for many months after the deadline, so you can submit your taxes using that service.
However, if your tax return is much older, the CRA’s Voluntary Disclosure Program (VDP) may be the right option for you. This program is designed to give taxpayers a second chance to correct their taxes or to file returns that were not filed when they should have been filed. If you apply and are accepted into the VDP, you will still have to pay the taxes that you owe (plus interest, if applicable) but you could receive relief from penalties as well as from potential prosecution. However, it’s important to note that recent changes to the VDP mean that those who the CRA believes have intentionally avoided their tax obligations will not receive the same relief as those who made an unintentional error. For this reason, it’s important to speak with a professional before applying for the VDP.
Worried About Late Tax Filing? Talk to a Ex-CRA Tax Dispute Expert for Free.
We can help by:
- 1| Offering a comprehensive solution that is focused on achieving the most favorable possible outcome for your tax issue;
- 2| Communicating with the CRA on your behalf and navigate the entire CRA dispute process; and
- 3| Offering a complete solution to your tax problems, including ex-CRA professionals in affiliation with tax lawyers from Farber Tax Law.
Late Tax Return Penalty
As mentioned, the CRA is very serious about the deadlines it sets. It expects to have taxes filed on time and taxpayers who do not follow these deadlines and comply with the tax system will be penalized.
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 also charge compound daily interest on any unpaid amount starting on the day after your return is due. In most years, this date is May 1st, as tax returns for most people are typically due on April 30th. Since this interest is charged daily, the longer you go without paying your tax debt, the most expensive it becomes. However, the CRA doesn’t just charge interest on outstanding debt. It also penalizes taxpayers for late tax filing.
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. However, this is only the case if you have filed your taxes on time in recent years. If you have frequently filed late, the CRA can charge a steeper penalty. This is done to discourage people from late tax filing.
If you were charged a late tax filing penalty in any of the three previous years as well as 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. Based on these numbers, it means that you could potentially owe up to 50% of your tax debt in penalties. Just like with interest charges, the longer you go without filing your returns, the more you will be expected to pay.
There are options that could see penalties and interest reduced or waived. These are commonly known as “Taxpayer relief provisions.” However, you will need to apply for this relief and the CRA will only grant relief if you have a valid reason and proof to back up your points. If you wish to apply for taxpayer relief, you will want to do so with a professional by your side to give yourself the best chance of success.
Also, keep in mind that penalties and charges aren’t the only possible outcome if you do not file your taxes on time. As mentioned, if you don’t file your tax returns, the CRA could consider your actions to constitute tax evasion. This is a very serious charge and one that you do not want to find yourself faced with. Farber Tax Solutions can help you if you are in a situation where you may be charged with tax evasion. Contact our team right away if you are in this situation.
How Far Back Can You File Taxes in Canada?
If you were required to file your taxes, you should file your taxes in full and on time. If you cannot file your taxes on time for whatever reason, you should take action and file them as soon as possible. The longer you wait, the more difficult your situation will become.
Whether your late tax filing is 1 year, 5 years or even 10 years past due, it is important to act 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. You could be missing out on benefits that you are entitled to receive 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. When filing past tax returns Canada Revenue Agency has a process that you should follow and programs that may make it easier to do so.
If you are considering filing past tax returns and wondering how to file late tax return Canada, know that 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 the interest 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. Our team of legal and ex-CRA professionals can help resolve your tax situation.
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 then not agreeing to waive penalties or possible prosecution. This is obviously a problem. 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.
Tax Deadline in Canada
For most Canadians, the deadline to file federal tax returns is April 30th. By this date each year, you must file your returns for the previous year (for example, you must file your 2019 tax returns by April 30th, 2020). If this date falls on a Saturday, a Sunday, or a public holiday recognized by the CRA, individual returns will be considered on time if they are filed the next business day. If you have a balance owing, the CRA will charge compound daily interest on any unpaid amounts starting on May 1st. This means that if you owe a tax debt, it’s a good idea to pay it as soon as you possibly can. Otherwise interest charges will start to quickly add up.
Individuals who are self-employed (and their spouses) have until June 15th to file their returns. However, if you have a balance owing, it still must be paid by April 30th to avoid interest payments.
Final tax returns must be filed for deceased persons as well. The deadline to file these returns is the normal filing deadline of April 30th or six months after the date of death, whichever is later. For example, if a person dies on October 1st, six months from that date would be April 1st. Since April 30th is later, the return would be due on April 30th. However, if the person died on November 15th, six months from that date would be May 15th, which is later than April 30th and thus the return would be due on May 15th. If a person died on January 30th, 2020, their 2019 tax return would be due on July 30th, 2020 (six months later) but a 2020 tax return would also be due on the regular 2020 due date (April 30th, 2021).
Non-residents of Canada (those who normally live outside Canada or who stay in Canada for less than 183 days a year) must also pay tax on income received from sources in Canada. Generally, the deadline for these returns is April 30th. However, the deadline is June 15th if the individual or their spouse or common-law partner carried on a business in Canada. Balances owing must still be paid by April 30th to avoid interest charges.
If you are filing late taxes Canada Revenue Agency will charge a penalty. Returns that are filed after the deadline will be charged a penalty 5% of the balance owing, plus 1% of the balance owing for each full month the return is late, to a maximum of 12 months.
However, if you have also been late tax filing in the last few years, these penalties can increase. If you have been charged a late tax filing penalty in any of the three previous years and then file late again, your penalty could be 10% of the balance owing for the most recent tax year, plus 2% of this balance owing for each full month your return is late, to a maximum of 20 months. As you can see, these are very significant penalties. This is why it is a good idea to file your tax returns on time, even if you are not able to pay the balance owing.
How to File Late Tax Returns in Canada
The longer you wait after the deadline to go about filing late taxes Canada, the more difficult your situation will become. The CRA continues to charge interest on outstanding debt, and penalties continue to add up each month. Also, the longer you go without filing, the greater the likelihood of the CRA will consider your situation to be purposeful evasion and potentially seek criminal charges against you.
If your return is less than a year overdue, the most straightforward thing you can do is file it as normal. This means sending in your paper returns or using Netfile to submit online. Keep in mind that outside of the typical “tax season,” the Netfile service may not be open to receive returns at all times. Once you submit your return, the CRA will assess it as per usual. If you owe interest or penalties, the CRA will inform you of this fact and you will be responsible for paying what you owe.
Even if you are unable to pay your tax debt, you should still file a return. As mentioned, it is not a crime to owe taxes, but it could potentially be considered a crime if you do not file. There are options available to people who cannot pay their taxes in full. The CRA may be willing to consider a payment plan where you pay your debt over a period of time. However, the agency will never accept less money than is owed to it. If you owe tax debt and aren’t able to pay the outstanding amount, contact Farber Tax Solutions before you attempt to negotiate with the CRA. The agency can be very tough to negotiate and communicate with and you will want our experts on your side.
If you wish to know how to file late tax return Canada, know that if your returns are more than a year late or if you have several returns that have not been filed, your best option may be to apply for the Voluntary Disclosure Program (VDP). This program is designed to give those who have not filed returns that should have been filed or who have made errors or omissions on their returns a “second chance.”
If you are accepted into the VDP, you could be eligible for relief from prosecution for late tax filing and even potentially receive relief from penalties. This can be a good thing for taxpayers who are interested in filing past tax returns Canada. However, there are certain circumstances that must be true for your VDP application to be considered.
To qualify for the Voluntary Disclosure Program, your situation must:
- Be voluntary. This means you will need to come forward with the missing tax information before the CRA contacts you about your returns.
- Be complete. You must give the CRA all missing or incorrect information during your disclosure.
- Have a penalty attached. If you are not facing a potential penalty, the VDP is not for you.
- Be more than a year old. If your return is less than a year old, you should simply file as usual.
- Include payment of the tax debt owing.
If you are considering applying to the VDP, contact us today. Our team will help give you the best chance of success.
Concerned About Filing Your Taxes Late? Talk to a Ex-CRA Tax Dispute Expert for Free.
How Many Years Back Can I Get a Tax Refund in Canada?
If you do not owe money on your tax return, you will not pay a penalty for filing late. However, it is still strongly recommended that you file. Not only is it a legal requirement, but the CRA will hold onto any refund that you are expecting until you file. This means you will be giving up money that should otherwise be yours. If you’re filing late taxes Canada benefits may not be delivered either, since the amounts of these benefits (such as the child tax benefit) often depend on the numbers in your tax returns.
You have ten years to file a return and still claim your tax refund. After this time, the CRA may not give you the money that you are owed.
No matter what your tax situation may be, it makes sense to file as soon as possible. Some people may believe that it’s better to ignore your taxes and that the CRA will not notice. While the agency may not say anything right away (especially if you are owed a refund), that doesn’t mean they won’t eventually find out. The CRA is a very large and powerful agency. It will recognize that you have not filed your tax returns on time and the longer you go without filing, the more potential trouble you could find yourself in.
If you don’t file your tax returns, the CRA could potentially start to investigate your finances. Even if it finds that you are not hiding anything, this still isn’t a good situation to be in. It could even potentially open you up to an arbitrary assessment. This is a situation where, since the agency doesn’t have your financial details for a certain tax year, it estimates your situation. Of course, the numbers that the CRA estimates may not be accurate, but in the absence of actual tax returns, the agency will go with whatever numbers that it needs to use. Even if the numbers the CRA is working with are accurate, the agency won’t necessarily take advantage of all the deductions and credits that you would have used if you filed your return yourself. If the CRA has begun investigating you or if it has completed an arbitrary assessment for you, please contact us today. You need to have experts on your side to help you resolve your tax situation.
If you have not filed a return that should have been filed, the CRA may consider your situation to be tax evasion. This means that the agency could seek criminal charges against you. If you are found guilty of tax evasion, you will still be required to pay the tax debt you owe (plus penalties and interest) and you could potentially be fined up to 200% of the taxes evaded. You could even face jail time.
This is clearly a very serious situation and one that needs to be handled correctly. Contact the professionals at Farber Tax Solutions today. Our expert team is comprised of legal and ex-CRA professionals who know what it takes to solve tax problems. We have a long history of successfully negotiating with the CRA and resolving tax issues. Trust our team to be on your side. We level the playing field.
Filing Taxes Late When You Don’t Owe
As mentioned, if you do not owe tax, the CRA will not charge you a penalty even if you file your tax return late. However, it’s still important to file. The first reason why is because it is against the law for someone who should have filed a return to not file. The CRA could consider this to be tax evasion or it may arbitrarily assess you and consider the amounts generated from this assessment to be accurate. An arbitrary assessment is a situation where a taxpayer has not submitted a return, so the CRA estimates their income and then uses the numbers from its estimate to complete a return. Of course, in these situations the numbers may not be accurate and the likely won’t arrive at the same conclusion that you would have if you filed the return yourself.
This is why it’s important to file your tax returns, even if you do not owe money. Another reason is that the CRA will hold back any refund that you may be entitled to receive until you file. You likely won’t receive various government benefits (such as the Canada Child Benefit) either, since these benefits are based on the numbers in your tax return. That’s why, even if you don’t owe taxes, you should still file your tax return and why you should file it as close to the deadline as possible.
Wondering how to file late tax return Canada? If your return is less than a year late, and you don’t owe any money, you can simply file your return as you usually would. This means using Netfile (when it’s open) or mailing in your paper return.
If your return is more than a year late, or if you have missed several returns, you may wish to contact the CRA. If you do not have any outstanding tax debt, you won’t be charged any penalties, but the agency will be able to assist you in the correct method for filing your old returns.
However, if you owe tax debt and wish to file a return that is more than a year old, the CRA’s Voluntary Disclosure Program could be the best option. This is a program designed to provide a “second chance” to taxpayers who did not file returns as they should have or who wish to correct errors in returns that have been filed.
Recently, changes to the VDP have created two different programs. If you apply under the income tax stream , you may be accepted into the general program, but there is a chance that you could be accepted into the limited program instead. This program provides no interest relief. In addition, while you will be protected from criminal prosecution relating to the information you disclosed and will not be charged any gross negligence penalties, other penalties (such as late tax filing penalties) will still apply. The limited program is for those who the CRA believes have intentionally avoided their tax obligations. Since you will not know which program you will be placed into when you apply, it’s important to have tax professionals on your side before you act. Contact us to see how our team can help.
What if you File and Can’t Pay What You Owe?
Some people are under the mistaken belief that, if they can’t pay their tax debt, it’s better to avoid filing taxes at all. They feel that the CRA will not notice them and will not come to collect on the money since the taxpayer did not file their taxes. This tactic is untrue. Not filing your taxes does not make the CRA forget about you. Even filing late taxes Canada is better than not filing them at all. In fact, not filing your taxes can potentially make your situation worse. There are a few reasons why.
The first is that this situation could potentially be considered tax evasion. Tax evasion is a crime where a taxpayer purposely attempts to avoid paying taxes. If you do not file your tax returns because you cannot pay what you owe, the CRA could consider this an attempt to evade taxes. The penalties for tax evasion are very severe and could potentially include prison time and a criminal record.
However, another reason why you should still file even if you are not able to pay what you owe is because the CRA charges late tax filing penalties. These penalties are charged for each full month that your return is late, so the cost of not filing can be very significant.
If you have a balance owing and are not able to pay it in full, the CRA will begin charging compound daily interest on any outstanding amounts. The rate of interest the CRA charges can change every three months and the current rate is posted on the CRA website. It’s important to note that, if you have amounts owing from previous years, the CRA continues to charge interest on those amounts and any payments you make will be first applied to the amounts owing from previous years.
In some situations, the CRA will be wiling to negotiate with you to arrange a payment plan. However, this can be more difficult to do than you may assume. The first reason why is it tough is because the agency will only accept 100% of the debt owed. In some situations (such as where an illness, death in the family, natural disaster, postal strike, etc. caused your return or your payments to be late) the CRA may be willing to reduce or waive interest and penalty charges, but it will never take less than the full amount of principal owing.
Another reason why negotiating with the CRA is difficult is because the agency considers the debt owed to it to be the top priority. If you contact the CRA and request a payment plan, they will want to know many details about your income, expenses, assets, and more. They will then use this information to create a payment plan. However, since they consider tax debt to be the top priority, this plan might make it difficult for you to afford your other living expenses and repay any other debts you have.
Before contacting the CRA to discuss paying a tax debt, contact us. We have the experience and skill needed to successfully navigate complex CRA processes and resolve your tax issue. Our experience in handling CRA negotiators can make the difference!
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.