In 2016, there were over 10 million tax returns filed in Ontario. Are you one of the individuals that filed late or forgot? It's a common issue, but unfortunately can have negative consequences on your behalf.
Depending on your situation, different penalties can be applied and you may be subjected to a CRA reassessment. Below you will learn about CRA late filing penalties, deadlines, and how to receive tax relief.
CRA penalties for filing taxes late
Filing taxes late for 2017 will result in requiring to pay 5% of the balance owed and an extra 1% for every month that your return is late for up to 12 months.
A late filing penalty for 2014, 2015, and 2016 tax returns may be 10% of your total 2017 balance owed and 2% of this amount for every month that the return is late for up to 20 months.
If an individual does not file a tax return for an income of $500 or more during any given tax year, this is considered failure to report income. Federal and provincial penalties are the lesser of:
10% of how much you didn't report on your tax return.
50% of the difference between the understated tax, the amount you failed to report and the withheld tax you failed to report.
Some individuals purposely file incorrect information on their tax return to pay less or to bump them into other tax brackets. This is punishable by the CRA as it is considered false statements. The penalty for this is:
$100
50% of the understated tax amount
CRA interest relief
Both penalties and interest owed have the potential to be waived in certain circumstances. The CRA administers legislation gives Revenue Canada the ability to pardon interest or penalties when tax payers are unable to meet requirements.
The relief is limited to the past 10 years, so if it's 2018, the latest you could receive relief for is a tax return from 2008. You will need to make a request to fill out the RC4288 form to do this.
CRA reassessment
When tax returns are not filed on time or filed incorrectly, the CRA may request to reassess your tax statements. It can happen randomly or if they suspect that you are avoiding paying.
Normally Revenue Canada will go back four years to reassess your tax returns. But in more severe cases, they may go back further than that. You will receive a letter or notice of reassessment, comparing what you submitted to data from third parties.
If you can't make the payment owed, interest charges can add up. It sometimes is an amount that many people can't afford to pay and damages their financial standing for years to come.
The CRA reassessment processing time can take upwards to 6 months or more. If you need help with a reassessment, interest relief, or similar, please contact me today for a free 30 minute consultation.