Paying Your Taxes; Adjusting Your Taxes
The weeks leading up to the April 30 filing deadline are always quite hectic: trying to get hundreds of tax returns filed. We focus on the clients that have taxes payable and owe Canada Revenue Agency. We want them to avoid the late filing fee.
What happens if you file after April 30 and it turns out you owe CRA? You are subject to a 5% late filing penalty; for example, if you owe $1,000, CRA will add $50. And for every month you are late, CRA will add 1% of what you owe.
So if you have not filed your taxes yet, we suggest you file by May 31 to avoid any additional penalties.
Those who are self-employed with small businesses have until June 15 to file without additional penalty. And the spouses of those self-employed also have until June 15 to file.
Any amount owing for everyone starts accruing interest as of May 1. So the sooner you pay the amount owing, the less interest continues to be added to your tax bill. The interest rate is a reasonable 5%. For example, if you owe $1000, the interest is about $5 per month. We recommend if you owe CRA and cannot pay it all immediately, that you pay 1/12 per month so it’s paid off in full within 12 months and before next year’s filing tax deadline.
Good news from CRA! If you received COVID benefits and you have an amount owing, they are waiving the interest to April 30 2022. So you have an extra 12 months to pay the amount owing without paying any additional interest. This is only available if your taxable income is less than $75,000.
This interest free 12 months is only for the amount owing for 2020 taxes and only if you received COVID benefits. If you have an amount owing from a previous year, that amount will continue to accrue interest.
If you did not receive any COVID benefits and you owe, you do not get interest relief.
This provides some interest relief to those who may still be not working or have reduced income. We still recommend you try to pay 1/12 of the amount you owe each month. It will be easier to pay a little bit each pay or each month then to try to find the whole amount next Spring.
Changing your taxes
Sometimes we file tax returns before the April 30 deadline to get them filed on time even if they are not quite complete. We may be missing some information but we know the client has an amount owing. We file as is to avoid the late filing penalty.
We know that we can get the missing information later and can adjust the taxes to amend the amount. Adjusting taxes or making changes is relatively simple, so we don’t mind filing first and adjusting later.
There are many reasons to adjust taxes shortly after filing or throughout the year. We often add missing information like medical expenses, donations, RRSP contributions, or the seniors school tax rebate.
If you filed your taxes before April 30 and realize you missed some info, you can still request your taxes be adjusted. There are specific forms used to make adjustments and sometimes CRA will request you send in the documents to support your claim, so make sure you have all the receipts for any adjustments you are requesting.
Repeated Failure to Report Income Penalty
It’s important if you missed reporting some income like a T5 for interest earned that you get your taxes corrected as soon as possible.
There are large penalties levied by CRA if you fail to report income more than once. For example, say you missed $500 of income earned on your 2019 taxes and CRA reassessed your taxes later to include it; and then you forgot to report it again in 2020. The penalty is 20% of the amount of income not included. So that $500 not reported on your 2020 tax return will be assessed a penalty of $100. That’s a very high penalty, so make sure you report your income accurately each year!
If we filed your taxes and you realize later that something was missed, contact us as soon as possible to we can make the corrections.
If you are self employed, your tax filing deadline is June 15 2021; but file your taxes the sooner the better!
Anni Markmann is a Personal Income Tax Professional and Certified Financial Planner; living, working, and volunteering in our community. Contact us at 204.422.6631 or 36 Dawson Road in Ste Anne (near Co-op) or Info@SAtaxes.ca