What to do Next?
Filing on Time
The regular deadline for filing an income tax return for the previous year is April 30. This filing deadline is extended to June 15* if you or your spouse are self-employed. However, income taxes payable are still due on April 30. Similarly, the information return for “Specified Foreign Property” having an aggregate cost over $100,000 CAD at any time during the year (Form T1135) must be filed by the individual’s filing deadline.
Taxpayers who do not file their income tax returns on time face significant late-filing penalties: 5% of the balance due plus 1% per month to a maximum of 12 months for the first offence, plus applicable interest on the penalty. The penalty can more than double when the taxpayer fails to file on time for a second time in three years and if the Minister has issued a formal demand for filing.
Interest and penalties are not tax deductible and add up quickly at the rates charged by the CRA. Even if you cannot pay the taxes due, ensure that you file on time.*
*The filing deadline is June 17, 2024, for the 2023 taxation year, as June 15 falls on a Saturday.
Penalties for Failing to Report Income
If you have income from several sources, ensure you report all of it. Failing to report income on your return in the current year and in any of the three preceding years could be subject to federal and provincial/territorial penalties based on 10% of the unreported income in addition to paying the understated tax liability on the unreported income. Interest applies on the unpaid amounts. We recommend you ensure you have information on all of your income when having your return prepared.
Disclosing the Sale of Principal Residence
Many Canadians are aware that they will likely not pay tax on the sale of their home due to the principal residence exemption. However, some are unaware that this does not relieve them of the requirement to disclose the sale to the CRA. If you sold your home during the year, you must file your personal tax return, completing Schedule 3 and Form T2091(IND). Failure to do so will result in penalties.
Tax Instalments
Failure to pay quarterly income tax instalments when required may result in interest charges. It is possible to make catch-up payments and reduce or offset the interest charges. Contact your Crowe MacKay tax advisor if you are unsure if you are required to make tax instalments.
Importance of Filing
Failing to file your return can put you at a financial disadvantage even if you do not have income to report. Several benefits and social programs are available to individuals based on the income (or lack thereof) reported in their filed tax return. For instance, the Canada Child Benefit is a tax-free monthly payment from the government to assist eligible low-income families with the costs of raising children. To be considered for the benefit, you and your spouse must file your return every year. Guaranteed Income Supplement (GIS), GST/HST credit, and the Canada Workers Benefit are other benefits that are assessed and paid based on personal income tax filings.