Income Tax Deadlines Are Coming Soon But Why Do They Matter?
For Canadians, April 30 is the official deadline to file your personal income tax return with the Canada Revenue Agency and once you have completed your return, you will either be entitled to a return refund or have an amount owing.
The deadline, if you or your spouse or common-law partner carried on a business in 2017 (other than a business whose expenditures are primarily in connection with a tax shelter), is June 15. However, if you have a balance owing for 2017, you have to pay it on or before April 30, 2018.
To receive your refund in a timely manner you should file your return on or before the deadline and sign up for direct deposit. If you are not comfortable giving your bank account info to CRA then you can choose to receive your refund by check, however, this may take longer.
If you owe them
If you owe income taxes it must be paid on or before April 30 to avoid getting charged interest.
If you have an amount owing (of more than $2) and cannot pay it in full by the deadline, you will be charged compound daily interest. Generally, You can make arrangements for monthly payments as long as the debt is paid before the next income tax deadline. Contrary to popular belief, the interest you pay CAN NOT be claimed as a deduction on the following year’s income tax return.
What happens if you're late?
If you owe tax for 2017 and you file your return for 2017 after the due date, you we will be charged a late-filing penalty. The penalty is 5% of your 2017 balance owing, plus 1% of your balance owing for each full month your return is late, to a maximum of 12 months.
If you were charged a late-filing penalty on your return for 2014, 2015, or 2016 your late-filing penalty for 2017 could be 10% of your 2017 balance owing, plus 2% of your 2017 balance owing for each full month your return is late, to a maximum of 20 months. Yikes!
A large income tax debt is one of the first signs of financial hardship to come and shouldn't be ignored. Putting it on your calendar and getting filed and paid on time will save a lot of stress and could prevent bigger problems down the road.
For more information direct from CRA:
- Canada Revenue Agency - Policy on Interest & Penalties.
- Canada Revenue Agency - Policy on taxpayer relief for individuals and businesses.