We all procrastinate. Organizing paperwork and completing taxes is not a sexy task but sitting on your refund could be the one thing that keeps you from that coveted beach vacation. Read Justin’s story on why putting your taxes on the back burner should be avoided as it brings unwanted stress into your life. The good news is Beaumont Elder Accountants can help. Just reach out to us so that we can discuss your situation. Our contact information is listed below this article.
Source: Financial Post
Like many Canadians, Justin Schaefer gets stressed every year as the tax deadline approaches.
And he has good reason to be.
That’s because the last time the 32-year-old reported his income to the Canada Revenue Agency was for the 2011 tax year, and now he’s on the hook for $28,000 in back taxes and penalties.
He’s not alone.
According to the CRA, 8.6 per cent of Canadians who filed their tax returns last year did so after the April 30 deadline, triggering penalties, interest and in Schaefer’s case, warning letters, phone calls and even his missing returns completed for him against his will by the federal government agency.
“Tax season gives me a lot of anxiety,” said Schaefer, who is a contract worker in audio visual production in Toronto.
Sheryl Troup, a director of tax and estate planning at the Investors Group in Winnipeg, says there are many reasons why Canadians file their taxes late, ranging from being too busy, dealing with personal or professional issues or just forgetting or not caring about the deadline.
But if a filer owing taxes forgoes the April 30 target date, they can expect to pay a five per cent late penalty on the balance, plus one per cent in interest compounded daily for every month they do not file, for a maximum of 12 months.
For example, if someone has a tax bill of $10,000, they will immediately be charged $500 and by the tax deadline of the following year will owe a total of $11,037.30.
“Procrastination is the worst,” says Troup.
Another common excuse she hears for delaying filing is that people believe they are entitled to a refund, and will not face any penalties if they file late.
But that isn’t necessarily true because late filers, especially those who are low to middle income, risk losing government benefits such as child tax credits, access to provincial assistance programs and GST rebates if they don’t file on time. The CRA uses current tax reports to calculate eligibility for these programs each year.
“The other thing too is that the concept of the refund is that you’re owed money,” Troup says. “So why let the government use your money rather than have it for yourself?”
She also notes that on-time filers will benefit from receiving their refund earlier rather than later because that money can immediately be put towards personal savings or investments.
Lisa Gittens with H&R Block Canada says a key to meeting the deadline is to ensure all the paperwork, including T4 slips and receipts, are in order, and to make sure you have the professional help of an accountant if you need it.
Procrastination is the worst
There are also strategies for late filers once they begin to catch up.
The CRA has a voluntary disclosure program that gives Canadians a “second chance” to correct a previously filed tax return or to file one that is late.
Taxpayers will still be required to pay any tax and interest that is owed, but under the program a filer can apply for relief from prosecution and penalties.
The agency may also be able to put you on a payment plan if you are unable to pay the whole amount of owed taxes at once.
“The CRA is good at communicating with clients and taxpayers so just communicate with them and let them know what’s happening,” said Gittens, a tax professional in Toronto.
For Justin Schaefer, he’s optimistic that he will eventually be up-to-date with his returns.
He’s scheduled an appointment with his accountant next week to get help with his 2012 taxes, and has been making progress with the CRA to get his tax bill down.
Minimizing your tax burden requires knowledge, expertise and most importantly, planning. We are here to assist with your 2016 personal income tax and benefit returns.
Tax planning is vital to building your personal wealth and should happen throughout the year, not just at “tax time”. We have the experience and knowledge to help you understand the Canadian taxation system and can assist you in preparing and filing your income tax returns.
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