What you need to know about interest and penalties if you file your taxes late

The Canada Revenue Agency urges Canadians to file their taxes on time, warning those that do not must pay extra in penalties and curiosity. 

Tax season began final week, and taxpayers have till May 1, 2023 to file this 12 months, because the deadline of April 30 falls on a Sunday. This similar date is the deadline to pay if any cash is owed.

For those that are likely to procrastinate, here’s what you should find out about curiosity and penalties when you do not file and pay your taxes by the deadline.

INTEREST PAYMENTS

The Canadian Revenue Agency (CRA) says those that owe taxes could also be charged curiosity in the event that they pay late. Those who file their taxes They can even be charged a late-filing penalty if they’ve a stability owing and file late.

Compound day by day curiosity begins instantly (May 1), and the speed is topic to alter every calendar quarter – or each three months.

The rate of interest on a taxpayer’s present or earlier stability might be eight per cent on overdue taxes, based mostly on present prescribed rates of interest, in response to the CRA.

How a lot that curiosity will value varies. For instance, the rates of interest for the primary quarter of this 12 months for overdue taxes, Canada Pension Plan contributions and employment insurance coverage premiums is eight per cent – a rise of 1 per cent over that of Q3.

Based on Q1 of this 12 months, the rates of interest are 4 per cent on company taxpayer overpayment, and 6 per cent on non-corporate taxpayer overpayment.

The CRA says that the rate of interest used to calculate taxable advantages for workers and shareholders from curiosity free and low-interest loans is 4 per cent in Q1, which ends March 31. And the rate of interest for company taxpayers’ pertinent loans or indebtedness is eight per cent. 

The company has not posted a forecast for the second calendar quarter.

For those that decide to pay again what they owe in instalments, the CRA requires these funds be made on time. Otherwise, taxpayers can even be charged instalment curiosity. 

LATE PENALTIES

According to the CRA, the penalty for submitting a tax return after the due date whereas there’s a stability owing is 5 per cent of your 2022 stability owing, plus an extra one per cent every full month after the due date earlier than you file, as much as a most of 12 months.

The CRA says even those that can’t pay the sum of money they owe ought to nonetheless file their taxes on time to keep away from being charged this late-filing penalty.

In an instance of how these prices can add up, it stated if a taxpayer who was charged late-filing penalties in earlier years would, this tax season, face a penalty of 10 per cent of their stability owing, and extra two per cent for every month after the due date till their taxes are filed, as much as a most of 20 months.

Those paying with an installment plan will face late charges, however provided that their instalment curiosity prices exceed $1,000. 

If there are “circumstances beyond your control,” the CRA says, it’s potential to request these penalties be cancelled or waived, however this request can solely be made inside a 10-year span. If granted, this cancellation wouldn’t apply to debt older than that.

Reporting for this story was paid for by way of The Afghan Journalists in Residence Project funded by Meta.