The tax deadline is fast approaching – the deadline to file your 2013 return, as always, is April 30th – are you ready? Getting your returns in order and filing on time can sometimes be an annual hassle, but it can’t be avoided. Filing online is growing in popularity, and can be done from the comfort of your own home. But what if you miss the deadline – what are the consequences of this?
If filing taxes seems like a hassle, then dealing with the consequences of missing the tax deadline can seem like a nightmare, especially if you owe. Missing the deadline when you are owed money just means waiting longer to receive it (why would anyone want to do that?), but when you owe money, the Canada Revenue Agency (CRA) won’t wait – and that tax debt will just continue to grow the longer you wait to pay it.
What are we talking about here? When you owe a tax debt, interest and penalties accumulate at an alarming rate, to the tune of 5% of the total tax debt plus 1% monthly for up to 12 months. Additionally, if you filed late in previous years, your penalty can increase to 10% of the total tax debt plus 2% monthly for up to 20 months. These additional charges are significant, and left unpaid can grow to become larger than the total debt you originally owed.
Interest and penalties are not the only things that contribute to your tax debt becoming seriously problematic. Once the CRA knows that you owe, they can get pretty aggressive in their attempts to gather the money. Good cop, bad cop tactics to obtain your personal information, collection calls, and enforcement action (wage garnishments, frozen bank accounts) are all realistic and costly outcomes of a missed deadline and failure to pay.
So, knowing all of this, how can you avoid the irksome effects? If you know that you are going to end up owing money to the CRA it is a smart idea to have a plan in place before they learn about it. Firstly, if you have the ability to pay the debt in full upon filing, great – do that. This will solve the problem before it starts and leave you in a fresh financial position tax-wise. However, if you don’t think you can pay the debt in full, getting a plan in place to do so is a very smart idea.
For more information about avoiding the consequences of a missed tax deadline please contact DebtCare Canada by calling 1 (888) 890-0888 or visit us online at www.debtcare.ca