Well, the first thing is don’t panic. There could be various reasons why a person wouldn’t have paid their taxes. You could owe a significant amount of money and not be able to afford to repay, business hardship, life threatening illness, paying taxes might have slipped out of mind due to any reason, you may not have filed your taxes at all. In any circumstance, if you owe a tax debt to the Canada Revenue Agency (CRA), this problem won’t just disappear.
Millions of Canadians file their tax returns late – and if you are one of them just get started with your tax filing. The longer you wait to come clean, the harder the CRA will hit you with penalties and interest payments, and the likelihood of the CRA seeing your avoidance as tax evasion increases. The CRA may not have contacted you yet, but it doesn’t mean it will never.
Late filing charges and penalties begin as soon as you miss the tax deadline (typically April 30 each year, for most Canadians) there is an automatic late filing penalty of 5 percent of tax owing. For each month you do not file, you are charged another one percent.
In case you did pay your taxes but less than the tax amount you actually owe, the CRA will charge the interest amount daily on the amount owing. These interests and penalties add up faster, which is why the only escape to harsh catch by CRA on late filing is to resolve your tax situation sooner than later. This is a very difficult issue to face so it is best to contact an accountant in advance.
If you have failed to file your income tax returns, GST/HST returns, or corporate T2 returns for several years, there is a remedy for it, even when many years have transpired. If the CRA has not contacted you regarding your late filings, you may be eligible for the Voluntary Disclosure Program. It is a tax amnesty program, which will allow CRA to waive some or all of the penalties and some of the interest levied. We can help you determine your eligibility for this program and submit your application.
It should be noted that this program may be utilized by a taxpayer only once in their lifetime (barring any other exceptional circumstances). This option does not apply to everyone and it does not reduce the overall amount that you owe. You are bound to show proof that you were unable to file or pay your taxes on time to apply for this program.
You may also be eligible to arrange a payment plan with CRA. However, to negotiate a payment plan with CRA, you have to provide many details about your financial situation, including your income, your debts, your expenses, and your assets. Using this information, the CRA will decide whether to offer you a payment plan and if yes, how much you will need to pay each month.
It is important to consider that CRA will not ever accept less than you owed to it. It will want its money first and prioritize it over your other financial obligations. For example, the CRA may instruct you to only pay the minimum balance on your credit card to apply additional money to your tax debt. This will shoot up your costs, as credit card interest rates are typically quite high.
Before you take any steps to deal with back taxes, it is important the services of a financial professional who understands Canadian income tax. With years of experience in corporate and personal tax law, Filing Taxes is your premier partner for all your tax needs in becoming up to date with your tax filing obligations and mitigating penalties through amnesty applications. Feel free to reach out to Filing Taxes at 416-479-8532. Schedule your tax preparation appointment with us and take the first step towards proper management of your finances. Our professional personal tax accountants will make sure to get you the maximum tax refund on your personal tax return.