Tax Filing Deadlines:
Welcome to your comprehensive guide to Canadian tax deadlines. This resource is designed to provide a general review and analysis of crucial tax dates for individuals, businesses, and corporations. As tax requirements can vary based on your unique financial situation, this should serve as a starting point. For customized deadlines and further assistance, we offer Monthly and Annual Accounting Subscriptions. Harness the power of professional guidance to navigate tax season with confidence and ease.
CRA Explainer on payments:
If your PERSONAL tax owing position is above $3,000 then you have to make instalments to avoid instalment interest charges.
If your CORPORATION Taxes payable before deductions (for the current and previous year) exceed $3,000. Then you are required to make Quarterly instalment payments to avoid interest charges.
How to pay less interest to CRA:
MAKE MONTHLY PAYMENTS TO THE CRA TO AVOID ALL INSTALMENT INTEREST
File your Taxes on time to avoid all penalties.
if you file your TAX return late, CRA penalty applies.
The penalty is 5% of the unpaid tax that is due on the filing deadline,
plus 1% of this unpaid tax for each complete month that the return is late, up to a maximum of 12 months.
How CRA Charges Penalties:
The CRA Late Filing Penalty + CRA Late Payment Penalty can cost you up to $354 monthly + $271 monthly = $625 monthly or $7,500 a year.
Late FILING Penalty: If you fail to file your tax return by the due date, the CRA may impose a penalty. The penalty is 5% of the balance owing, plus an additional 1% for each complete month the return is late, up to a maximum of 12 months.
Example: if you file your tax return 12 months late and your tax owing is $25,000, the late filing penalty would be calculated as follows:
Late filing penalty: 5% of the balance owing ($25,000 *5%) = $1,250
Additionally, there would be an additional 1% penalty for each complete month the return is late, up to a maximum of 12 months. In this case, since the return is 12 months late, the additional penalty would be:
Additional penalty: 1% x $25,000 x 12 months = $3000
Therefore, the total late filing penalty would be $1,250 + $3,000 = $4,250 annually or $354 monthly
Late PAYMENT Penalty: If you fail to pay the full amount of tax owed by the due date, the CRA may impose a penalty. The penalty is 1% of the balance owing, plus an additional 1% for each complete month the payment is late, up to a maximum of 12 months.
Example: if you pay your tax owing 12 months late and the amount owed is $25,000, the late payment penalty would be calculated as follows:
Late payment penalty: 1% of the balance owing ($25,000*1%) = $250
Additionally, there would be an additional 1% penalty for each complete month the payment is late, up to a maximum of 12 months. In this case, since the payment is 12 months late, the additional penalty would be:
Additional penalty: 1% x $25,000 x 12 months = $3,000
Therefore, the total late payment penalty would be $250 + $3,000 = $3,250 annually or $271 monthly
Inaccurate REPORTING Penalty: If the CRA determines that you have made false statements or omitted information on your tax return, they may impose a penalty. The penalty can range from 50% to 200% of the tax understated or the benefit overstated.
Example: if your total tax owing is $25,000 and the inaccuracy resulted in a $10,000 benefit to your side of paying less taxes than you should have then the total tax bill can be 50% of $10,000 = $5000 or as high as 200% of $10,000 = $20,000. This inaccurate reporting penalty can range from $5,000 to $20,000 depending on CRA’s judgement.
Who’s responsibility is to file on time?
The responsibility to file taxes on time and pay taxes on time lies with the taxpayer. It is the individual or business owner's responsibility to ensure that their taxes are filed accurately and submitted by the deadline set by the Canada Revenue Agency (CRA). Failure to do so may result in penalties and interest charges.
While accountants can assist with tax preparation and provide guidance, the ultimate responsibility for filing taxes on time and paying taxes on time lies with the taxpayer.
Top 10 Best Practices:
Prioritize Consistent Payments: Aim to make monthly payments to the CRA. This practice can help avoid the accumulation of INSTALMENT interest.
Never Miss a Deadline: Make sure to file your taxes on time to circumvent any penalties.
Understand Late Filing Consequences: Familiarize yourself with the implications of late tax filing. Remember, the penalty is 5% of the unpaid tax due on the filing deadline, plus an additional 1% of this unpaid tax for each complete month that the return is late, to a maximum of 12 months.
Maintain Detailed Records: Keep comprehensive and clear records of your income and expenses throughout the fiscal year. This not only facilitates easier tax filing, but also provides the necessary documentation during an audit.
Stay Informed About Deductions and Credits: Regularly update your knowledge on the various tax deductions and credits available. These can significantly reduce the amount of tax you owe.
Consider Professional Help or Software: Think about hiring a tax professional or using reliable tax software. They can guide you through complex tax scenarios and help you optimize your tax savings.
Update Personal Information Promptly: Keep your personal information, such as address, marital status, and number of dependents, updated with the CRA. This ensures accurate tax calculations and facilitates efficient communication.
Plan for Your Taxes: Don’t treat tax as an annual event. Keep it in mind throughout the year and make financial decisions that may positively impact your tax situation.
Review Your Tax Return: A final review of your tax return can help catch any errors or missed opportunities for deductions or credits.
Understand Your Rights and Obligations: Be aware of the Taxpayer Bill of Rights and your obligations under the law. This can protect you in case of any disagreements with the CRA and ensures you are complying with all legal requirements.
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