What are
the consequences for late filing of individual tax returns and late payment of
taxes and what is the time limit for filing the back taxes?
Consequences
for Late Filing (Invites Penalty):
As you may
be aware, the last day to file the Individual taxes in Canada is April 30. There
is no provision under Canadian Income Tax Act for applying for an extension of
time unless in the year of death of the taxpayer (minimum 6 months of time from
the date of death is granted).
Self-employed
taxpayers file their taxes latest by June 15 of the subsequent year.
Whatever
may be the last date of filing the taxes, if there is any owing on the tax
return, must be paid by April 30.
If the
Individual tax return is filed late, there is a Flat penalty of 5% on the
amount of owing and a recurring penalty of 1% pm penalty on the amount of owing.
The penalty is levied for maximum 12 months’ delay. If this default is repeated
twice in a period of three years, then the penalty doubles. For example, if the
amount of tax owing is $1,000 on the Tax return and if it is delayed by 3
months, the amount of penalty for late filing will be 5% Flat + 3% delay
penalty = 8% on $1,000 will be $80.
Late Payment
of Taxes (Invites Interest):
Late payment
of Taxes invite interest consequences and the interest is levied ay the CRA at
the prevailing interest rate which is declared by CRA ahead of the next quarter.
The current rate of interest is 5% per annum.
Back Filing
of Taxes:
If you
have missed filing taxes for previous years, there is nothing to worry. Current
Income Tax Rules allow filing for last 10 years of taxes. The same rule applies
for amending the tax returns for the previous years which are already filed
with the CRA
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