Filing Your Taxes Late? Read This First

While filing your taxes late can feel stressful, it's always best to take action and begin the process as opposed to letting it drag out any longer. Here’s everything you’ll want to know.

Canada’s Tax Deadline

Understanding when exactly to file your taxes will help you avoid filing late in the future. In Canada, the deadline for filing personal taxes is April 30th. For self-employed individuals (or for Canadians whose spouse/common-law partner is self-employed), the deadline for tax returns is June 15th.

However, if you’re self-employed and end up owing taxes, you’ll need to pay these taxes by the 30th of April. So, while self-employed Canadians can file their taxes by June 15th, filing before April 30th is likely the better option.

What Happens if You File Taxes Late?

Filing your taxes can be an intimidating, overwhelming process at times. Even more so when you’re trying to file your taxes late. But the Canada Revenue Service (CRA) does have a system in place for late filing.

Though, you should understand that by filing your personal taxes late, you may be subject to penalties, interest fees, and/or a temporary loss of some government benefits until your taxes are filed and paid.

Interest Fees and Late-Filing Penalties

If you end up owing taxes on your return for the previous tax year, the CRA will begin charging compound interest on any amounts owed starting May 1st.

This interest comes out to an extra 1% for each month that your taxes are late, up to a maximum of 12 months. In addition, the CRA will also charge a 5% late-filing fee if you file your taxes past the deadline and owe taxes.

If it turns out that you’ve filed late before on more than one occasion, the CRA may increase the late-filing penalty from 5% to 10% and they may charge an additional 2% (instead of 1%) on the amount you owe every month your taxes are late for up to 20 months.

Even if you are unable to pay your taxes at the tax deadline, filing your taxes regardless is a better option and will keep you from having to pay additional penalties or interest fees. If you’re unable to pay your taxes on April 30th, you can work out a payment arrangement with the CRA to pay off your tax debt (plus interest) over a longer period.

Is there a Penalty for Filing Late if You Don't Owe Taxes?

If you don’t actually owe any amount of personal taxes, is there a penalty for filing late? While you won’t have any interest charges since you do not have a balance to add interest to, you can still be at risk of losing government benefits if you receive them.

The Canadian government uses tax return information to help determine eligibility for certain benefit programs, and filing late could cause a lapse in those benefits to occur. So even if you don’t owe personal taxes for a given year, you should always file your annual tax return before the deadline, or as soon as possible after the deadline.

What Happens if You Don’t File or Pay Taxes?

Not filing your tax return can be considered tax evasion by the CRA, and can result in serious legal consequences.

If you do not pay or file your annual tax return, you may be subject to actions from the CRA that include:

  • Wage garnishment
  • Redirecting of benefit costs to pay your tax debt
  • Asset seizure

You should always file an annual tax return and do so as soon as possible.

And if you need any help filing your personal or business taxes late, don’t hesitate to reach out to Leonard Tam Professional Corporation.

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