Canadians are very busy nowadays with their lives, their jobs, their families and countless other things. As a result of being so busy, some people, for whatever reason, do not file their taxes on time. So, what happens?
If your return is late and you have a balance owing, you will be subject to both interest and late-filing penalties. Interest is charged on the outstanding balance starting the day after the due date of the taxes payable, and is compounded daily. It can get expensive…
In 2015, the late filing penalty is 5% of the balance owing, plus 1% of the balance owing for every month that your return is late, up to a maximum of 12 months. Thus, the total penalty of 17% of the balance owing.
Interest rates are subject to change on a quarterly basis. For the current rates, please see the Canada Revenue Agency (CRA) web page which provides the prescribed interest rates.
Note that interest is also charged on penalties.
You should also be aware that if you were charged late-filing penalties for any of the 3 preceding tax years, your late filing penalties are doubled. You can read more about this on CRA’s web page Interest and the late-filing penalty.
Please also note that there is a difference between paying your taxes late and filing your taxes late.
If you file your taxes on time but don’t have the cash to pay the balance owing, you’ll be subject to interest. However, if you miss the filing deadline and file late, you’ll automatically be subject to a late filing penalty in addition to any interest on the tax balance owing.
The moral of the story is that the CRA is trying to encourage everyone to file and pay their taxes on time, and we strongly recommend the same.
If you need any assistance with filing your taxes, please feel free to call us.