The April 30th tax deadline is here, and in case you didn’t hear, there’s no extension this year.
Are you expecting a refund?
There is reportedly over $750,000,000 of unclaimed refunds sitting in Canada Revenue Agency’s (CRA) bank account.
Do you want to add to CRA’s bank account, or your own bank account?
And whether you have a refund coming or not, if you want to receive any refundable tax credits such as the PST credit or the GST rebate, or if you receive benefits such as the Canada Child Benefit or the Guaranteed Income Supplement you have to file your tax return.
Likewise any premium assistance for things like the BC medical services plan, requires you to file your tax return.
Bottom line, not being current with your tax filing puts government credits and benefits at risk.
Being a recipient or not of credits and benefits, if you owe taxes and if you haven’t at least filed your return, procrastinating will likely cost you money.
The day after April 30, the tax owed may have a five per cent penalty tacked on, so a $1,000 tax bill is now $1,050.
Plus a one per cent penalty is added for each month thereafter.
Now if five per cent seems like no big deal, you might want to know that CRA has the discretion to make that five per cent penalty as high as 50 per cent of taxes payable.
This means a $1,000 tax bill could jump to as high as $1,500 on May 1.
Noteworthy for this year, those who received COVID-19 benefits and owe tax for 2020 will not have any penalty or interest charged if they file their 2020 tax return on time, the key words being “file on time.”
Interest will begin to be charged next year starting May 1, 2022 on any tax balance still owing from 2020 at that time – between now and then, no interest charges.
Another incentive for filing on time is to keep you off CRA’s radar as a non-compliant taxpayer.
For those chronically late in filing, a demand to file request is generated by CRA and with only 30 days to respond, this could prove to be more than an annoyance.
Staying off CRA’s radar also includes reporting self identified mistakes within previously filed tax returns. If you discover an error or omission after filing your tax return, initiating your own request to CRA is the best policy.
It’s better to self-identify the issue rather than have CRA find it first.
If an adjustment is initiated by you, it is much more likely that CRA will only assess interest and not a penalty on any tax due.
And if you don’t think CRA will identify the mistake, rest assured that the CRA super computers work hard to match data from slips reported on a tax return, with copies of slips CRA receives from employers, banks and other sources and if there is a discrepancy, CRA will contact you.
A final word, if CRA does contact you requesting action on your part, it is best not to delay in dealing with the request, even if it’s a call to CRA stating, “I am working on it.”
Ignoring a CRA request may not only cost you more money than it would have, but you may be on CRA’s radar longer than you normally would have been.