CRA Tax Consequences: Late Filing Penalties
The Canada Revenue Agency timeline requirements which all taxpayers must abide by are well known. As a Canadian, you are required to file your income taxes by a certain date each year, and failing to file on time can result in penalties and interest assessed, often inflating a tax balance owing by an overwhelming amount.
For income tax returns, possible CRA late filing penalties and interest include:
Late-filing penalty: If you owe a tax debt and don’t file your return on time, you will be charged a late-filing penalty. Currently, the penalty is 5% of the balance owing, plus 1% of your balance owing for each full month your return is late, to a maximum of 12 months. If you have repeatedly filed late, the late-filing penalty may increase to 10% of your balance owing, plus 2% of your balance owing for each full month your return is late, to a maximum of 20 months.
Interest: If you have an unpaid balance, you will be charged compound daily interest on that amount. You will also be charged interest on any penalties charged. The rate of interest charged by the CRA can change every three months. Interest rates are published on the CRA’s website.
In addition, if you continually fail to file on time, or have failed to report income in previous years, you may be subject to additional penalties.
Repeated failure to report income penalty: If you fail to report an amount on your return (whether intentionally or in error), and you also failed to report an amount in any of the previous three years’ returns, you may have to pay a federal and provincial/territorial repeated failure to report income penalty. The federal and provincial/territorial penalties are each 10% of the amount that you failed to report on your current return.
It is easy to see how that tax debt can quickly grow after adding in penalties and interest, isn’t it?
Just wait – these penalties, while significant, may not be the only ones you face due to late filing. While owing a tax debt is not illegal, failing to file is considered tax evasion and you can be prosecuted. Don’t think that can happen to you? Just check out the countless average Canadians prosecuted every day: http://www.cra-arc.gc.ca/nwsrm/cnvctns/menu-eng.html.
Wait, there’s even more! If the CRA thinks that you have been negligent, gross negligence penalties equal to up to 50% of the tax debt may also be added.
Knowing that a large tax debt will be on file once you’ve filed can be stressful, but if you’re considering not filing to avoid it this is the worst thing you can do.
A tax debt is not a legal problem – it is a financial one. This means that you will need a financial plan to resolve it. There are financial solutions for dealing with a tax debt – even if it appears that you have no way to pay the debt. Get serious about your tax debt and seek help. Even with a large tax debt, the best course of action is to speak with a professional who understands the problem and can offer real solutions.
At DebtCare, we have years of experience dealing with tax debts. We can help you find a way to pay it off, as soon as possible.
Get in touch today: 1-888-890-0888.