What happens if you don't file your taxes on time?

What happens if you don
Photo: REUTERS/Mike Blake

Springtime in Canada is a season of renewal. The birds come back, the leaves begin to bud, and tulips and daffodils push through the soil to the sun. And of course, your income tax is due, too.

Sure as the sun rises in the east, every April 30, Canadians from coast to coast rush to file their personal income tax returns before the stroke of midnight. Failure to do so means a financial penalty on top of the amount you already owe to the government.

How much the penalty is depends on how much you owe. A standard late-filing fee is 5 percent of the balance owed, plus an additional 1 percent of the balance owed for each full month the return is late, up to a maximum of 12 months.

The penalties are the same for filing corporate taxes late, although the due date is different. Corporate taxes are due six months after the end of the fiscal year.

Repeat offenders pay more

Those who chronically file their taxes late may be subject to an even greater penalty. If you file late for the current taxation year and you filed late in any of the previous three taxation years, you’ll be on the hook for 10 percent of the amount you owe, plus a 2 percent penalty for each full month that passes. The maximum number of monthly penalties is 20.

It wasn’t my fault!

There are circumstances under which it may be impossible for a person to file his or her taxes on time. The government will consider granting a reprieve from a late-filing fee if you can show it was not a deliberate or negligent act. Legitimate reasons for missing the filing deadline may include:

  • Natural or man-made disaster
  • Accident, death, emotional or mental distress, or a serious illness
  • Civil disturbance such as a postal worker’s strike

If you feel you missed the deadline for a valid reason, you can file a Request for Taxpayer Relief form. You can dispute the late filing fee for any of the previous 10 taxation years, beginning with the year before the current year.

What if I don’t owe any money?

If you file late, but don’t owe any money, there is no penalty. It is still a good idea, of course, to file your taxes on time. You won’t get your refund until the CRA processes your return, and you may experience a delay in receiving any credits, such as the GST credit and the Canada Child Benefit. Why would you want to delay getting money back?

I didn’t file because I can’t pay

Not having the money to pay one’s taxes is an excuse commonly given for not filing. However, it is much better to file and avoid the late filing penalty and then deal with the monetary issue later.

Late filers shouldn’t overly worry about prosecution, as the CRA only prosecutes the most serious offenders. Filing late is not the same as tax evasion, a crime that can result in prison time. Before a person is charged, he or she would first have to ignore a formal demand from the CRA to file delinquent returns or pay any outstanding taxes.
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