It might be tempting not to file your taxes if you are afraid that you can’t afford to pay what you owe. However, the Canada Revenue Agency (CRA) has systems to check if you have unpaid or unfiled taxes. For example, the CRA has a system in place that enables them to receive a copy of T4 slips from your employer, so it is not difficult for the CRA to find out if you have paid your taxes or not.
What Happens If I Don’t File My Taxes in Canada?
There are several potential consequences to failing to file your taxes, from penalties and interest to, in the worst case, criminal charges for tax evasion.
The CRA will charge late-filing penalties of 5% if you fail to file your taxes by April 30 and an additional 1% per month for every month after that date until you pay, up to a maximum of 12 months.
Additionally, if the CRA charged a late-filing penalty for any of the last three tax years and has requested a formal demand for a return, your late-filing penalty will rise to 10% of your balance owed. You will also be charged an additional 2% for every full month that you file after the due date, up to 20 months.
In case you are unable to make your instalment payments on time, the agency also may charge a tax instalment penalty if your instalment interest charges surpass $1,000.
Should you not be able to meet your tax obligations due to circumstances beyond your control, you may request the CRA to cancel or waive penalties or interest. If your request is granted, the CRA may grant relief within ten years from your request date.
Filing Taxes Late In Canada
If you fail to submit your tax return by April 30, the CRA will charge a late-filing penalty of 5%. For every month after this date, they will charge an additional 1% per month until you pay, up to 12 months total.
On top of this, if the CRA has charged a late-filing penalty for any of the last three tax years and has requested a formal demand for a return, your late-filing penalty will be 10% of your balance owed and an additional 2% per month after, up to a total of 20 months.
Is There a Penalty for Filing Taxes Late if You Owe Nothing?
The CRA can’t apply interest on taxes you don’t owe, so you obviously will not see any additional charges. However, even if you don’t owe anything, filing your taxes late can lead to other consequences and complications.
Not filing your taxes on time can disqualify you from government benefits and certain assistance programs, such as the Canada Child Benefit (CCB), the GST/HST credit, or the Guaranteed Income Supplement (GIS). There are also other provincial or territorial assistance programs or benefits that you may lose your ability to qualify for.
Filing Your Tax Return
In general, the amount of income tax you pay directly correlates with how much money you earn in a year. Then you are able to reduce the amount of tax you have to pay by claiming qualifying expenses and tax credits.
In most cases, your employer will deduct the income tax from your pay and send it to the CRA. Even in these cases, you may have to determine how much you owe and pay the amount to the CRA.
Every year, you should file your tax return to report how much money you earned, ensure that you have paid all income tax you are supposed to, and access benefits and tax credits. After the CRA assesses your tax return, it will send a notice of assessment to indicate if you have paid too much income tax or not enough, advising you if you owe taxes or are eligible for a refund through credits and benefits.
How to apply for tax credits and benefits?
A few things to note are the tax deadlines, which are different depending on your situation, as well as tax credits and benefits.
As an employed individual, you should file your tax return by April 30. It is important to note that if you are submitting your taxes by mail, your letter should be postmarked before April 30 to avoid potential penalties.
If you or your spouse are self-employed, the deadline to file your income tax and benefit return is June 15.
If you are a small business owner, you also should file your income tax return by June 15. However, you should pay off any balance owing from the previous tax year by April 30.
In the case of corporations, income tax returns should be filed up to six months after the end of the tax year. This will make this date variable depending on the corporation’s fiscal period.
Other important factors are tax credits and benefits you may be eligible for. There are basically two different types of tax credits that you might be eligible for, refundable and non-refundable tax credits. Refundable tax credits are credits that can reduce the amount of income tax you owe. But you may also be eligible for them if you don’t owe taxes, like the Ontario Energy and Property Tax Credit. Non-refundable tax credits can reduce the amount of income tax you owe, such as certain donations and gifts.
Have confusions or queries? Don’t worry, Risman Zysman is here to help you or answer all your queries.
Tax Return FAQs
How long can you go without filing taxes in Canada?
There is no definitive time that you can go without filing taxes. The CRA has systems in place that allow them to search for people who have not paid their taxes, so it is very difficult to avoid paying your taxes for a longer period of time.
There also is a Voluntary Disclosure Program that has been set up by the CRA, which allows people that are behind in the filing and reporting of their income tax to disclose this fact and repay their taxes without the imposition of penalties. However, should the CRA find out that you have failed to file your taxes and contact you about it before you contact them, then you will have to pay all penalties and interest applied to the amount you owe.
What is considered tax evasion in Canada?
Any individual or corporation that fails to file their tax returns as they should, fails to declare their income completely and accurately, or claims false expenses on their tax return, is committing tax evasion.
Can the CRA check my bank account?
Yes, the Canada Revenue Agency can check your bank account and freeze any assets.
Can I file 2 or 3 years of taxes at once?
Yes, it is possible. However, the later you file your taxes, the harsher the potential penalties may be.
How long can you go without filing taxes in Canada?
According to the CRA, a taxpayer has ten years from the end of a calendar year to file an income tax return.
What happens if I haven’t filed taxes in 10 years in Canada?
Filing your taxes late might result in penalties and accruing interest from the CRA.
What happens if you haven’t filed taxes in 3 years in Canada?
The CRA can issue an arbitrary Notice of Assessment if you have several years of outstanding returns. In most cases, these assessments require you to pay a higher amount of tax than you normally would have paid if you had filed a return.
Is there a penalty for not filing taxes if you don’t owe Canada?
If you don’t owe any taxes, there is no penalty for not filing your income tax. However, you may lose your eligibility for certain benefits and assistance programs.
