The 2012 Canadian income tax filing deadline is almost here.
April 2013 is the Canadian tax deadline for your 2012 personal income tax return.
If you are operating a business in Canada the Canadian tax deadline for businesses is June 15th, 2013. But if you are going to owe taxes the estimated amount of taxes that you anticipate that you will owe must be paid to the CRA by April 30th, 2013.
So, what if you know you are going to owe income or business taxes once you file and don’t have the money to pay the taxes? Well, not filing is certainly not the answer. A very common mistake by Canadians is to attempt to hide and deliberately miss the Canadian tax deadline. They are afraid that once they file their returns the Canada Revenue Agency will demand to be paid in full.
There are many consequences to missing the Canadian tax deadline:
1. HST credits, Canada child tax benefit payments, and old age security benefit payments will be delayed.
2. As soon as you miss the 2012 Canadian tax deadline the Canada Revenue Agency will apply a 5% penalty to the tax debt that you owe. In addition, the Canada Revenue Agency will charge a further penalty of 1% per month for up to 12 months. And this is just the penalties.
3. You will also be charged daily compound interest on both your tax debt and the penalties back to the date that the filing would have been due.
4. If you were penalized for late filing in 2009, 2010 or 2011, and you miss the Canadian tax deadline in 2012, your late filing penalty may be increased to a 10% penalty just for missing the deadline and then 2% per month for up to 20 months.
5. If you file late twice or more within a four year period you may be hit with a “repeated failure to report income” penalty of up to 20% of the total amount of income that was earned and not reported for the tax year in question.
6. Worst of all, you could be criminally prosecuted for tax evasion. The Canadian tax system relies on self reporting and punishes those who do not comply.
It is not illegal to owe money to the CRA but clearly filing late is not a good option. Of course it is scary because once you alert the CRA that you owe they will demand payment and can then start collection actions.
What to do?
1. Acknowledge that you have a tax problem and stop delaying dealing with it as it will only get worse.
2. Do not attempt to fix this alone. In the CRA you are dealing with an extremely complex set of Federal laws, internal directives and policies in a bureaucratic setting. You can easily make your problem much worse by saying the wrong thing or not saying the right thing. As you are already, from the CRA’s perspective, a “bad taxpayer”, seriously consider obtaining professional services from an expert in solving tax problems.
If you recognize that you have a tax problem the best thing that you can do is seek professional guidance. Once late tax returns are filed a tax problem is essentially a financial one. It is a smart choice to work with a professional organization that specializes in resolving tax compliance problems and who can qualify you for a program:
1. To file late returns and avoid late filing penalties altogether.
2. That, under certain circumstances, the CRA can agree to cancel interest and penalties.
3. That will freeze the interest on your tax debt and enable you to repay the debt on a voluntary monthly payment plan that you can afford.
4. That can reduce the principal tax debt that you owe.
Instead of missing the Canadian tax deadline for 2013, contact Tax Solutions Canada to come up with a plan to terminate your tax problem. For more information visit www.taxsolutionscanada.com or call 888-868-1400.