What Happens If You Miss the Tax Deadline in Canada?
Missing the tax deadline in Canada can be a stressful and costly experience. Every year, Canadians have a filing deadline of April 30th (or the following weekday if April 30th falls on a weekend) to submit their tax return. If the tax deadline is not met, some consequences can come with failing to file your taxes on time. Whether you've missed the deadline due to unforeseen circumstances or forgot, it's crucial to understand what happens if you miss the tax deadline and what you can do to mitigate the consequences.
Late-Filing Penalty
If you miss the tax deadline in Canada and fail to file your taxes on time, you may be subject to a late-filing penalty. This penalty is 5% of the balance owing plus 1% of the balance due for each full month your return is late, for a maximum of 12 months. For example, if you owe $1000 in taxes, you’ll be charged an initial penalty of $50 (5% of the balance due). If your return is still outstanding after one month, you’ll be charged an additional 1% (or $10) for each month it is late, up to a maximum of 12 months. That’s an extra $120 in penalties. The late-filing penalty cannot be more than the amount of the balance owing.
Interest Charges
If you miss the Canadian tax deadline, you will not only be subject to a late-filing penalty but also interest on any balance owing. Interest charges will begin to accumulate the day after the filing due date and continue to accrue until the balance is paid in full.
The current interest rate on overdue balances is 5% per year. Interest is compounded daily, and it is calculated monthly. For example, if you owe the Canada Revenue Agency (CRA) $1,000, the total interest charge at the end of the month would be about $4.17 ($1,000 x 0.05 x 30/365).
Interest charges can add up and significantly increase your debt. It is important to remember that you are responsible for paying any interest that accumulates, even if it was caused by a CRA error or delay in processing your return.
Reassessment
If you miss the tax filing deadline, you may be reassessed. This means the CRA may review your taxes again and change what you've already filed. These changes can include things like changing deductions or credits or increasing the amount of taxes you owe.
If you are reassessed, you will receive a notice of assessment that explains why the changes have been made. It is important to note that this isn’t necessarily bad – the CRA may reduce your taxes, depending on the information they found.
The CRA can reassess your return up to three years after the filing deadline for that year, so it’s essential to keep track of your returns and any changes the CRA makes. The CRA may also reassess your taxes if they receive information from another source (such as your employer).
Legal Action
Missing the tax filing deadline can lead to severe consequences. Depending on the specific circumstances, failure to file on time can result in a criminal conviction, with penalties that include up to two years in jail and/or fines of up to $25,000. Even if the amount owed is low, the CRA can still pursue legal action if a taxpayer fails to submit their taxes on time.
The CRA will first attempt to contact taxpayers who fail to meet the filing deadline. The CRA will inform them of the consequences of not filing and may demand immediate payment of any taxes owed. If a taxpayer still does not file, the CRA can take steps toward prosecution and have the person charged with a criminal offence.
Filing Your Taxes Past the Deadline
Yes, you can still file your taxes after the April 30th deadline. However, you will be subject to specific penalties and interest charges for filing late. The Canada Revenue Agency (CRA) encourages everyone to file their taxes on time, but they understand that sometimes things happen. They also understand that extenuating circumstances can lead to late filing or late payment of taxes.
Under the Taxpayer Relief Program, the CRA may waive or cancel all or part of interest and/or penalties if you cannot pay your taxes due to circumstances beyond your control. These circumstances may include the following:
• Death, serious illness, disability or mental impairment of yourself, your spouse or common-law partner, or your dependents
• Unusual circumstances such as a natural disaster or theft
• Financial hardship due to job loss, bankruptcy, or inability to pay for medical expenses
• Long delays caused by the CRA that could affect your ability to meet your tax obligations
If you believe you qualify for assistance from the Taxpayer Relief Program, you can apply online or call the CRA directly. The CRA will review your situation and decide based on their discretion. You may also be able to negotiate with the CRA on an alternate payment plan if you cannot pay the total amount due.
Missing the tax deadline in Canada can result in severe consequences that can affect your financial well-being and access to government programs and services. By staying informed and taking proactive measures to file your taxes on time, you can avoid the adverse outcomes of missing the tax deadline and ensure that you remain in good standing with the CRA. Contact Blackspark today to get started!
This blog post is intended to provide general information only and should not be construed as tax advice or opinions. Always consult a qualified accountant before making any decisions regarding your tax situation.
