Penalties For Late & False Tax Returns

Each year, the Canada Revenue Agency asks Canadians to file their taxes by April 30^th. And each year, thousands of Canadians miss that deadline for a variety of reasons.

If you missed the deadline simply because you were busy or unprepared, you may owe more than you realized. Read on to learn about the dangers of filing late.

late-filing penalty

Any amount owed to the CRA is subject to a penalty of 5% compounded daily, and an additional 1% for each full month that elapses without filing a return. While the additional 1% has a maximum of 12 months, after a year the CRA can increase the late-filing penalty up to 10% of the balance owing.

Repeated failure to report income penalty

For those who fail to report amounts on returns for subsequent years, you may have to pay this fee, which is 10% of the amount that was not reported. This penalty exists on both a federal and a provincial/territorial level.

That said, if you tell the CRA about an unreported amount, the fee may be waived.

False statements penalty

The fine for having an omission or false information on your taxes can be large. The fee is $100 or 50% of the under/overstated credits related to the omission or false statements. Again, honesty is always the best policy and the CRA may waive this penalty if you voluntarily tell them about the omission.

There are many pitfalls to filing a late tax return, but the best way to avoid them? Be prepared. Consult Liu & Associates with any questions or concerns you have about your return. We can help you easily steer clear of these penalties and have your taxes filed by April 30^th each year.

5 Consequences of Late Tax Return

As tax season approaches, do you treat April 30^th like more of a guideline than an actual deadline for filing your tax return? If you do not owe the Canada Revenue Agency (CRA) any money, then April 30 certainly is a guideline. However, if an amount is owed to the CRA and you miss the April 30^th deadline to pay, you may find yourself in unnecessary trouble.

The following list outlines the consequences of filing a late tax return:

Penalties and Interest

If you have a balance owing to the CRA, compound daily interest begins on May 1^st. Additionally, the CRA charges interest on the penalties. Late payment charges start at 5% of the amount owing, plus 1% of that balance for each late month.

Loss or delay of benefits

Even if you do not owe CRA any money, a delayed tax return may result in a delay of your benefit payouts. GST credit or Child Tax benefits, for example.

A higher risk of being audited

If you report false information, don’t pay taxes or neglect to file any return at all, the Government of Canada can start investigating. Audits can be lengthy and punishment is severe.

Potentially publicizeD information

The CRA doesn’t shy away from publicizing your case if you cheat on your taxes or end up getting fines or imprisoned. The Convictions section of the CRA website details cases of Canadians who have done just that. This is to show other Canadians what could happen and to help increase compliance.

Jail time

It may seem like a stretch, but some Canadians do wind up serving jail time for tax evasion. Many cases are settled out of court but if a case ever goes to criminal trial, the conviction rate is 98%.

Consider all of this and bear in mind that taxpayer relief exists for individuals who are unable to file their taxes on time due to inability to pay, serious illness, disasters or even CRA error. For the average taxpayer: filing your tax return a day late may not mean much in the moment, but bad habits can add up to pricey consequences. Contact the experts at Liu & Associates today for help!

Accountants vs. Tax Software

While taxes are an annual routine, financial circumstances can fluctuate from year-to-year and many filers are left wondering if their income and assets could benefit by having an accountant handle their tax return.

The following profiles will break down the types of tax returns that are best handled by an accountant and which benefit from using tax-filing software

TAXPAYER X

Taxpayer X works one full-time job. She is not married, nor does she have any children. She owns her home but has not yet started an RRSP or purchased any major assets. Taxpayer X made one charitable contribution of $100 and paid back the minimum to her student loans.

When Taxpayer X files her income tax, her best option is personal income tax software.

TAXPAYER Y

Taxpayer Y works full-time but changed jobs during the year. His spouse is self-employed and they have two dependent children. They own their home, a lake house, and a vacation rental in Mexico that makes some profit. Both Taxpayer Y and his wife contribute to RRSPs and they share an investment portfolio. Taxpayer Y made significant donations to several charities and often takes clients on business lunches.

When Taxpayer Y files his income tax, his best option is an accountant or accounting firm.

Accountant or tax software?

While the two cases above cover extremes of income tax filing, they represent a good baseline to judge your own tax return needs.

Personal income tax preparation software is available at a low cost and offers a convenient, speedy way to put your finances in order. Professional accountants may cost more, but they can make the most of your return with more advanced software, answer any questions you might have, and can deal with any complex issues involved in your finances.

Either way, be attentive to important financial documents and keep orderly files to ease the stress of income tax filing.

Still not sure what your best option is? Contact Liu & Associates for guidance!

Choose The Right Personal Tax Software For You

It is more popular than ever for people to manage their own finances with personal tax software throughout the year and, most importantly, during tax season. There are many options, both free and pay-to-use, with yearly updates and a variety of interfaces. Here are some guidelines to help you select the right type of tax preparation software:

INSTALL OR ONLINE

Generally, personal income tax software comes in two forms: a program installed on a computer or an interactive online system.

Installed programs have the advantage of being accessible for year-round financial management, though they often cost more than their online counterparts.

Online systems do not take up any space on your computer, but they do require a constant internet connection while in-use. Additionally, choose a program that is compatible with your operating system (ie: Windows or Mac).

NUMBERS OR WORDS

Before you make a purchase, evaluate and compare the data-entry methods of any potential income tax preparation programs. While many offer the cut-and-dry process of filling in numbered boxes, some services present a more streamlined, “interview”-style approach to collecting your information.

In either case, all calculations are done for you and are easy to review. Consider your preference carefully when selecting your tax preparation software.

KNOW YOUR NEEDS

Premium tax software at a higher price has no impact on the quality of your tax return. Research your own requirements before you settle on which personal income tax software is right for you.

If you are filing for a single income, without kids or any considerable assets, there is no reason to spend extra money on high-end software. Conversely, if you a have a complex return that includes things like rental property or foreign income, most low-cost or free software will not be sophisticated enough to generate a proper income tax return.

Still have questions? Contact the team at Liu & Associates!