Tax season is upon us and that normally means one thing in Canada: most people are in a mood that matches the weather outside. No need to worry! The majority of tax filings are pretty straightforward, and for more difficult filings there are plenty of tax professionals willing to lend a hand to make it go smoothly. Still, lots of people have some basic questions about filing taxes in Canada that need to be answered clearly. In this blog, we’ll answer the 3 most common tax return questions that we get from clients each season.
Question #1: When are my taxes due?
If you do end up owing money on your tax returns, the balance needs to be paid in full by the deadline or else you will be subject to interest and penalties on the late payment. Your income tax return (and any balance due) is due on April 30th each year. That’s why it is best to get the ball rolling early. And it is never too early to start preparing for next year’s taxes (learn why that’s true in this blog post)!
Note: If you or your spouse are self-employed, your return is not due until June 15th, though any balance owing on your return is still due by April 30th.
Tip: Make sure that you pay your balance due in full on or before the April 30th to avoid late payment penalties. Alternatively, you could choose to make instalment payments to pre-pay your taxes and ease the burden on your cash flow.
Question #2: Where do I file my taxes?
When utilizing a tax professional your tax return will be electronically filed with the Canada Revenue Agency. There are a few situations where your return must be paper filed, but for the majority of taxpayers these exclusions do not apply.
If you do need to paper file, the address to where you file your taxes depends on where you live and what form you are filing.
Tip: Electronically file your return in order to get it processed faster, especially if you are expecting a refund! And to receive your refund quicker, ensure that your direct deposit information is up-to-date with the Canada Revenue Agency.
Question #3: What happens if I file my taxes late?
There are always a few panicked customers that come to us after putting things off too long, and then they find out that they cannot file and/or pay on time. If you owe on your return and pay late, then you’ll be assessed a late payment penalty of 5% on the balance owing. A late filing penalty of 1% of the balance due will be assessed for each month your return is outstanding, up to a max of 12 months. The CRA also charges interest that gets compounded DAILY on balances due (including penalties), with rates subject to change quarterly. If you’re late, then get to a tax professional immediately.
Tip: Make sure your return is postmarked and/or electronically filed before midnight on the due date to avoid late filing penalties! If you are late filing, talk to a tax professional to learn about your return submission options to minimize penalties on late-filed returns.
Tax season can be a headache, but it doesn’t have to be! We hope these answers to the three most common tax return question in Canada has been helpful. For assistance with filing your returns, business planning, and/or late tax returns, get Quon & Associates.