How you feel about filing your income tax return depends on your bottom line. For many Canadians, filing an annual tax return ultimately brings some form of happiness, as it means a good-sized refund is on its way. While for others, the feeling might be a little less pleasant. If you owe a balance on your tax return, you may be tempted to simply not file it. Unfortunately, failing to file your return can have major financial implications – whether you owe or not.
Penalties
Along with the substantial interest that’s applied to unpaid balances, failing to file your tax return brings another consequence – penalties. And the penalties are stiff! If you fail to file your 2017 return by April 30, 2018, anything you owe will be charged a late filing penalty of 5% plus 1% for each month it’s late, for up to 12 months. So if for example, you don’t file your 2017 return until April 2019, you will face a penalty of 17% on any balance you owe, plus interest at the prescribed rate.
And if you’re a chronic late-filer, the penalties increase substantially. For example, if you had late filing penalties in any of the last three tax years, a penalty of 10% plus 2% per month (for up to 20 months) could be applied to your 2017 return if it’s also filed late. So, if you had late filing penalties in 2016 and decide not to file your 2017 return again this year, by the time you file in April 2019, your penalty could be as high as 34%!
Of course, if you do not have a balance owing, penalties/interest do not apply to you.
Interruption of Benefits
If you’re receiving the Canada Child Benefit or Old Age Security benefits, filing your return on time is especially important. Your eligibility for each of these benefits is updated every July and determined by the numbers on your tax return. The amount of your benefits is also linked to your income listed on your return, so if you fail to file your tax return by the April 30th deadline, you risk having your benefits delayed.
Eligibility for the GST/HST quarterly credit, as well as other various province benefits, is also determined by numbers on your tax return, so it’s important to get it in on time to take advantage of these credits.
Income Records
Outside of the direct financial implications, not having a current tax return can affect other aspects of your life. The numbers on your filed return are used for so many other purposes, such as determining:
- Loans of all types, including student loans, mortgages, and business lines of credit
- Student grants, as well as certain bursaries and scholarships
- Low-income grants for programs such as home repair & heating rebates
As you can see, failing to file your tax return on time can bring many negative consequences. Even if you can’t pay your balance in full by April 30th, file anyway. You’ll be saving yourself money and hassles in the long run!
With an easy-to-use tax preparation software like TurboTax, preparing and filing your return is fast and takes the work out of getting your taxes done right.
About Jennifer Gorman:
Jennifer is a tax expert and leads TurboTax’s social customer support team. With more than 20 years of tax preparation experience, she enjoys holding yearly seminars in her hometown in Newfoundland to teach seniors and students how to use TurboTax to prepare their own returns.
