Tax Tip Thursday

Since we are rapidly approaching the tax filing deadline, I want to make sure everyone understands the due dates and ramifications of filing late when you owe taxes.

Due Dates

Personal Tax Returns – Not Sole Proprietor – May 2

Personal tax returns are due Monday, May 2 this year. But if you are having someone prepare your taxes, do not wait even one more day! Contact your accountant right away and definitely do not wait until May 2.

Personal Tax Returns – Sole Proprietor – June 15

If you or your spouse are Sole Proprietors, then your tax return is not due until June 15, BUT, if you owe tax, it is payable May 2!

HST

HST filing for Sole Proprietors is also due on June 15, BUT, if you owe tax, it is also payable May 2!

Corporations

If you own a corporation, the tax filing is due 6 months after your year end, BUT, if you owe tax, it is payable 90 days after your year end.

Penalties for Late Filing

These penalties apply to both personal and corporate filings. If you file your tax return after the due date and have a balance owing, you will be charged a late-filing penalty. Filing late may also cause delays to your benefit and credit payments.

If you cannot pay your balance owing, you should still file on time to avoid being charged the late-filing penalty.

The late-filing penalty is 5% of your 2021 balance owing, plus an additional 1% for each full month you file after the due date, to a maximum of 12 months. If the CRA charged a late-filing penalty for 2018, 2019, or 2020 and requested a formal demand for a return, your late-filing penalty for 2021 will be 10% of your balance owing. You will be charged an additional 2% for each full month that you file after the due date, to a maximum of 20 months.

The late filing penalty still applies when you get interest relief if you received COVID-19 benefits.

Tax Instalment Penalty

It is important to know that if you owe more than $3,000 in the 2021 tax year, in 2022 you will be required to make instalments toward the 2022 taxes: NOT to pay the outstanding balance of your 2021 taxes! They are not suggestions, they are a requirement. If your instalment interest charges for 2022 are more than $1,000, then you will also pay penalties on your missed instalments!

Request to Cancel or Waive Penalties or Interest

You can make a request to the CRA to cancel or waive penalties or interest if you are unable to meet your tax obligations due to circumstances beyond your control. The CRA can only grant relief within a 10 year span from your request date.

Still Haven’t Filed?

If your taxes are not done yet, you are going to want to make every effort to get them completed on time! The Mad Accountant team is ready to get you back on track; book an appointment as soon as possible.

Disclaimer:

This article provides information of a general nature only. It is only current at the posting date. It is not updated and it may no longer be current. It does not provide legal or tax advice nor can it or should it be relied upon. All tax situations are specific to each individual. If you have specific tax questions you should book an appointment for a 1 on 1 consultation.