2013 Income Tax DeadlineMissed the 2013 tax deadline to file your 2012 tax returns? Then you should read this blog as it will give you a high level overview of penalties and interest that you could be facing once you file.

First time offender

The late filing penalty for taxes owed for 2012 will be subject to a 5% penalty based on the amount outstanding. In addition, the offender will be subject to a 1% penalty per month for up to 12 months.

Previous offenders

If you were charged a penalty for late filing in any of the 3 years preceding the 2012 tax year, CRA may apply a 10% penalty based on the amount of the tax debt and up to 2% per month for up to 20 months. Furthermore, if you fail to declare income in 2012 and you also failed to report income in the preceding 3 tax years, you could also be subject to an additional 10% penalty.

In addition to the above penalties, interest is also charged on both the tax debt and the penalties, retroactively. The current interest rate is 5% but because the CRA compound interest (interest charged upon interest) daily it very quickly adds up.

If CRA believes that you have made a false statement on a tax return or alleges gross negligence (which they do all the time), you may be subject to a steep fine, plus a penalty of up to 50% of your tax debt.

Not filing your tax return is tax evasion. Failing to declare income is tax evasion. Claiming false expenses is tax evasion.  In all cases you could also be criminally prosecuted.

It is not illegal to owe money to CRA. It is illegal to not file.

Many people fail to file tax returns or declare income because they are afraid that they will have a large tax debt that they will not be able to pay. It is always better to get your returns filed or the undeclared income declared rather than waiting for CRA to catch up with you.

Now that you are really thinking about getting that income declared, useprograms like the Voluntary Disclosure Program (VDP) that will enable you to come clean on unreported income or past due returns and avoid penalties and interest altogether.

Even if you don’t qualify for VDP, you can still take advantage of a Notice of Objection to object to a penalty or Taxpayer Relief if there were special, qualifying circumstances that led to your tax problem. A tax problem can be very scary, but you will be much better off taking a deep breath and dealing with it.

A professional who focusses on protecting taxpayers who are at fault or who simply owe money they cannot pay will get you the best solution possible without shooting holes in your feet.  One wrong step in any of these complex processes can get you into serious trouble.

For more information about what you can do to resolve a tax problem and deal with penalties and interest please visit www.taxsolutionscanada.com or call 1-888-868-1400.