What is your tax filing deadline? How much time do you have to file and what are the costs of not filing or of filing late?
Personal taxes are due on April 30 unless that date falls on a Saturday, Sunday or a holiday in which case the return is due on the following business day. If you or your spouse are self-employed, your personal tax return is due on June 15 but any amounts owing need to be paid by April 30. Interest will be charged on any balance still owing after April 30th.
If you file your return on time, but do not make the payment on balances owing by the tax filing deadline, interest is compounded daily starting on the following business day. The current rate of interest is 5% annually, however this rate is subject to change by CRA every 3 months.
If you do not file your return by the tax filing deadline and there are balances owing, the late filing penalty is 5% of your balance owing plus 1% of your balance owing for each full month your return is late up to a maximum of 12 months. If you have incurred a late filing penalty in the last 3 years, the penalty is doubled to 10% on your balance owing plus 2% of your balance owing up to a maximum of 20 months.
If you know you are going to receive a refund and choose not to file by the tax filing deadline, there are some disadvantages you should be aware of. Although there are no interest or penalties assessed on your return since there is no balance owing, CRA only pays a 1% annual interest rate on refunds. It is much better to get the refund and invest the money on your own. There is also a 3 year limitation period to claim any refunds. If you are expecting a refund and have not filed your taxes in over 3 years, CRA is under no obligation to provide you the refund.
The tax filing deadline for corporate tax returns is based on the corporation’s fiscal year end. Interest on a tax balance owing begins to accumulate either 2 months after year end for larger companies or 3 months after year end for smaller businesses. The interest rate is currently set at 5% and is compounded daily.
The tax filing deadline for a Canadian Controlled Private Company (CCPC) is 6 months after the fiscal year end. If the return is not received within 6 months of the fiscal year end, the penalty imposed by CRA is 5% of the balance owing plus 1% of the balance owing for each complete month that the return is late up to 12 months. One way to avoid penalties, when you know you will not file your return by the tax filing deadline, is to pay any balance owing in full or to make a payment to cover any estimated balance that may be owing.
If the corporation has a failure to file penalty imposed in any of the preceding 3 years, the penalty increases to 10% of the balance owing plus 2% interest on each complete month that the return is late up to 20 months.
If the Corporation is in a refund position and chooses to miss the tax filing deadline, there are some disadvantages the Corporation should be aware of. Although there are no interest or penalties assessed on your return as there is no balance owing, CRA only pays a 1% annual interest rate on refunds. It is much better to get the refund and invest the money in the Corporation. There is also a 3 year limitation period to claim any refunds. If the Corporation is expecting a refund and has not filed their taxes in over 3 years, CRA is under no obligation to pay the refund.
If you would like more information or have any questions, feel free to contact us at 780.466.6204, or click here to send us an email.
Thanks to Sophie Duncan of KWB Chartered Accountants for providing this content.
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