Nobody likes the sinking feeling of realizing that they have missed the tax deadline. Late tax filing can come with a lot of stress because of the penalties. People worry about what the Canada Revenue Agency might do. But there’s nothing to worry about.
This blog explains what to do when you’ve missed the tax deadline in Canada. Let’s discuss how you can take back control.
What Happens When You Miss the Tax Deadline in Canada
Remember this: the moment your tax deadline passes, the CRA will start imposing penalties on you. If you owe money, they will also apply interest. As experts, we analyzed and listed down what you can expect before filing late taxes:
CRA Late Filing Penalty
The main penalty that CRA can apply is calculated on the tax balance that you currently owe. The official CRA late filing penalty is 5% of your 2023 balance owing. There is an additional 1% for each full month your pay is late. This continues for a maximum of 12 months.
If the CRA charges you with a late penalty in any of the previous 3 years, the penalty will increase. The penalty leaps to 10% plus 2% per month. This can be up to 20 months.
More Interest Charges
Apart from the main penalty, the CRA can also charge interest. The amount of interest charged will depend on your unpaid tax balance. It will also depend on what kind of penalties you got. This starts the day after the deadline. This rate increases very quickly because it is compounded every day.
Long-Term Effects
Penalties and interest aside, there can be few long-run consequences of not filing taxes. Until you file the tax, the CRA can’t calculate benefits like the GST/HST credit or the Canada Child Benefit. Being late can delay and even stop these payments.
If you’re part of the late tax-filing self-employed community, you will need a clean tax record. This is helpful to access EI special benefits.
How to File Late Taxes in Canada: Step by Step
The best way to stop penalties and interest from growing is to take action.
Here’s how to file late taxes in Canada and start resolving the issue.
Step 1: Gather Your Documents
First, collect all the information. It’s best to use a checklist to get all your tax information. You will need:
- T-slips for income
- Receipts for any expenses
- Dedications you plan to claim.
Step 2: Complete Your Tax Return
You have to complete the tax return for the year that you missed. You’d want to be as accurate as possible. Keep your finances and bookkeeping records clean.
Step 3: File and Pay as Soon as Possible
As soon as your return is complete, you can file your taxes online. You can also do it by mail. If you owe a balance, then it’s best to pay as soon as possible. This way you can stop interests from growing.
How To Reduce Penalty For Filing Taxes Late
The CRA also has programs that help people who filed their taxes after the deadline. But they offer these programs for those who come forward to fix their tax situation. One such program is the Voluntary Disclosures Program (VDP). VDP can help reduce people from penalties for taxpayers.
Getting professional help is another way of dealing with late tax filing. At Phoenix Knight Financial Services, we specialize in this area. We have dedicated late tax filing services. Our experts communicate with the CRA on your behalf.
Conclusion
A late tax filing is a serious issue. That does not mean it is not manageable. Taking swift action as we suggested can correct the situation. If dealing with the CRA is too complicated, let a professional team do the talking. We’ve helped many in this regard. Reach out for a consultation today!
