It happens to many Canadians every year – you don’t set aside enough time to get your paperwork together, and you file at the last minute, or in some isntances, even late. Here are 5 reasons as to why this could really hurt your financial plan, and even worse, cause potential headaches with CRA.
1. Your Tax-Related Benefits Will Be Delayed
The net income from your tax return is used to determe your eligibility for monthly benefit payments such as Canada child tax benefit payments (including those from certain related provincial or territorial programs), old age security benefit payments, and GST/HST credits. So if your income tax return isn’t filed on time, your benefits won’t arrive on time either.
2. Financial Penalties and Interest
The Canada Revenue Agency will start charging you compound daily interest on the day after your tax return was due, on any unpaid amounts owing for the previous year as well as charging you interest on any penalties they have assessed.
And if you owe taxes or penalties from previous years, CRA will continue to charge compound daily interest on what you owe in addition to taking whatever payments you make and applying them to your oldest debts first, thereby increasing the amount of interest you pay over the life of the debt.
The interest charged depends on CRA’s current prescribed interest rates.
So there you have it; three powerful financial motivations to get your income tax done and filed on time. Even if you think you will have a balance owing and don’t know if you’ll be able to pay it all off by the April 30th tax filing deadline, getting your return filed on time is the smart thing to do.
3. More Time to Pay if You Owe
If you know that you will be owing taxes, filing early could give you more time to pay. Suppose that you know that you will owe $2,500 in taxes. If you file in January, you still have until April 30th to plan how you will repay this amount. If you file in late-April or late, you are subject to penalties, and still need to figure out how to repay your CRA debt.
4. More Time to Prepare
With CRA’s recent breaches, many online user accounts were locked, making it more difficult to obtain past Notice of Assessment (NOA) and other documents. The more time you give yourself, the more time you have to make sure that you have all of the proper documents.
5. More Time to Plan
If you file (or at least calculate your taxes early) you will have more time to speak with an advisor and determine the best course of action, as well as maximizing your tax savings.
Remember, Don’t File Late!
There is never a good reason for filing late – and if you are having difficulty filing your taxes or managing your tax debt, you can always contact us.