Over the years, we have fielded many questions and concerns from real estate investors, business owners, and other clients who, sometimes sheepishly, sometimes fearfully, have approached us to say that they are behind on their tax filings. I always start this conversation with “You are not the only one”. Approximately once a month we have a client who comes in with several years of personal and corporate tax returns to catch up on. We will then work together to make a plan, and execute on it, to get them back on track.
Yes, the Canada Revenue Agency imposes stiff penalties on those who fail to file their tax returns and can make their lives extra stressful. Ultimately the CRA can go to court to help force the filling. When a taxpayer is convicted by a court of not filing a tax return, in addition to any fines imposed by the courts, they must still file the return and they will be obligated to pay the full amount of taxes owing, plus interest and any civil penalties that may be assessed by the CRA. A jail sentence may follow.
But, if you have neglected to file a tax return in the past, here is some good news:
- Very few situations need to go to court.
- Typically penalties and interest are based on the amount of taxes owing, so if you are behind it may not be a disaster by any means (be careful though as some tax deductions /credits/opportunities require returns to be filed in a given time period).
- If you have been arbitrarily assessed (in other words, the CRA effectively got tired of waiting for you to file so they came up with their own figures), you have another chance to catch up provided you act accordingly within 90 days – get some professional help to ensure you retain the opportunity.
- It may be in your best interest to use the CRA’s Voluntary Disclosure Program, but first discuss the pros and cons with your advisor.
Above all, the time to start dealing with late tax return filings is now. Speak with your professional advisors and get this weight lifted from your shoulders.
George E. Dube, CPA, CA