If you are a business owner, have missed the tax deadline of April 30th, you may not be in hot water just yet.
There are many businesses, and individuals, who find themselves in this situation.
The most important thing to remember is that filing a late tax return is better than not filing one at all.
Luckily, our team of professional accounts, along with the Voluntary Disclosure Program, can ensure that your late tax return is properly filed while working to minimize any penalties and interest accrued by filing your taxes late.
Learn more about what can happen when you file your taxes late and how you can mitigate any negative consequences:
Filing Corporate Taxes
All corporations operating in Canada have to file a T2 corporate tax return each year – even if the corporation was inactive throughout the year.
Corporations need to be formally dissolved in order to not exist anymore. Otherwise, the corporation is still considered in existence by the CRA and must file taxes every year.
Late Tax Return Penalties
Any taxes filed late to the CRA, when taxes are owing, will typically receive a late-filing penalty.
The penalty is calculated based on 5% of the late return plus 1% of the balance owing for each full month your return is late – up to a maximum of 12 months.
However, if you are habitually late in filing returns, this penalty can increase to 10% of your last late return plus 2% of the balance owing for each full month your return is late – this time, up to a maximum of 20 months.
If you do not owe taxes, no penalty will be applied. However, the CRA is within its rights to hold onto any refunds you are entitled to until the return is filed.
Late Tax Return Interest
In addition to a penalty fee, you will be charged compound daily interest on the owing balance starting May 1st.
Additionally, you will also be charged interest on any penalties beginning the day after your return is due.
Compound daily interest will also be charged on any amounts owing from previous years as well.
Failure to Report Income
Another penalty exists called the “repeated failure to report income” penalty and is implemented if you fail to report any income twice or more within 4 years.
This is a serious penalty but can be avoided even if you have failed to report income. Should you decide to voluntarily tell the CRA, they may waive this penalty.
This can be worked out through the Voluntary Disclosures Program, of which our expert team can help you navigate to avoid serious penalties.
Late Tax Return Penalty Exemptions
Of course, there are always special circumstances in which you may be able to have late tax return penalties waived or cancelled.
If you fail to meet your tax obligations due to reasons out of your control, you can apply to the CRA for these penalty reliefs.
Keep in mind that the CRA has specific guidelines on who qualifies for this program and granting relief is up to their discretion.
Better Late Than Never!
Don’t wait to file your late taxes – filing late is better than not filing at all.
Liu & Associates can help you through the process by creating a solution to your late tax filing – no matter if you are a business or an individual living in Edmonton or Calgary.
Why wait another day? Get in touch with Liu & Associates to book your tax appointment!