Are you behind on your tax filings?
Not filing your personal tax returns can leave you in an increasingly bad position. There are several things to consider when trying to rectify the situation.
Did you have any income?
Generally, the Canada Revenue Agency (“CRA”) calculates interest and penalties on the balance of taxes outstanding. If you did not have any income (after deducting expenses and any credits you may be entitled to) odds are that you will not have any tax liabilities. Therefore, CRA will not generally access any interest and penalties. However, this is not always the case as individuals that are repeatedly filing their taxes late may be subject to additional penalties.
Penalties for late filing your income tax return is five percent of the unpaid taxes plus one percent per additional month late. For example, if you are over one year late and have unpaid taxes, you can be subject to a penalty of 17 percent of the unpaid amount. In addition to the penalty, CRA will charge monthly interest on the balance at the rate of the prescribed rate (Currently six percent).
If the individual continually files late, the penalties may increase as high as 50 percent of the unpaid taxes.
As a standard, the interest and penalties will accumulate faster than your ability to save to pay them off.
What will happen to me if I continually neglect my tax filings?
CRA will attempt to contact you by mail via a request to file. If the request is ignored, CRA will issue a demand to file. Eventually, CRA may decide to issue an arbitrary assessment. The arbitrary assessment is designed to prompt you into filing your tax return. It is usually higher than what you would have otherwise paid if you had filed your return.
What will happen to me if I continually ignore my unpaid taxes?
CRA will start collection proceedings leading up to and potentially including garnishing your wages.
Are your required to file your personal tax return
Do you have the money to pay for your taxes?
Management of your personal cashflows is not an easy task.
Money is easier spent than accumulated and you must be aware of the fact.
You have the money
We suggest bringing in all your personal documents for the years in question. We can prepare your personal tax return and submit them to the government.
Once the government has assessed the returns, they will calculate the interest and/or penalties associated to the amounts owing. If the interest and penalties are reasonable, we can help you make the payment to the respective agencies. If the interest and penalties is a large amount, we can create a request for Taxpayer Relief Provisions.
You do not have the money
The process for getting your filings current is the same whether or not you have the cash to pay for the taxes. Once the tax returns are filled, CRA will know the total amount of taxes owing. If payment is not received by the due date, CRA will begin its collection processes such as garnishing wages (CRA has super creditor abilities as such they have the ability to withdraw funds directly from your personal bank accounts). When CRA is threatening collection procedures, they are often trying to start a dialogue with you in an effort to create an arrangement of payment. Usually CRA will pursue legal action as a last resort.
We can help create a plan that takes your lifestyle into consideration and communicate it with CRA. CRA usually responds very well to accountants.