Contractor Alert: Delinquent Tax Return Strategies
Filing taxes late can be very… taxing. If you’re considering a delinquent tax return, it could mean fines, penalties, and increased costs from CRA.
As the 2017-2018 tax deadline nears in Canada, it’s a good time to take stock of your financial standing. April 30 is the deadline for most Canadians, and June 15 for those who are self-employed (i.e. sole proprietors and contract workers).
First things first: if you’re considering not filing your tax return or filing late — Don’t Do It! If you know you will owe a tax debt that you can’t pay, it’s better to get good advice and consider your options instead of burying your head in the sand. The Licensed Insolvency Trustees at Fuller Landau Debt Solutions can assess your situation and give you guidance in a free consultation.
But what if you already have a delinquent tax return(s)? Many Canadians haven’t filed in years and the longer it snowballs, the more they become afraid to deal with it and this could be very costly. If you find yourself in this boat, make 2018 the year you do something about it.
What’s at stake if you don’t? Penalties, late filing fees, and even criminal prosecution from CRA. They have the power to collect through many means, including wage garnishments, seizing assets, and more.
CRA outlines the penalties on the Government of Canada website.
It can be expensive! If this is your first time missing a tax deadline and you will owe, CRA penalties are equal to five per cent of the balance owed, plus 1 per cent of the balancing owing for each month you’re late, up to 12 months. The penalties start the day after your return is due. If you’ve filed late in the past, the penalties are even steeper. You could be paying 10 per cent of your balance owing, plus an additional two per cent of your balance owing for each full month your return is late, to a maximum of 20 months.
And that’s not all — CRA can also charge interest on those penalties. Interest is compounded daily with a rate that changes every three months.
Even if you can’t pay your full balance owing, filing your taxes before this year’s deadline will help you avoid adding even more expense with the late-filing penalty.
If you owe a tax debt from multiple years, or will owe a tax debt you can’t afford this year, you’ll want to get advice from a financial professional before you talk to CRA. A financial professional who routinely helps people with tax problems, such as a Licensed Insolvency Trustee, can help you understand your ability to pay and what arrangements CRA may or may not accept.
A delinquent tax return can cause a lot more stress and hassle than it’s worth. If you’re in this situation, Fuller Landau Debt Solutions can help. Our Licensed Insolvency Trustees can assess your tax situation and make a plan to get you back on track. There is no cost for an initial consultation. Contact us today at (416) 927-7200.