As discussed in our last column, May 1 triggers important changes related to the GST/HST; nevertheless, it's important not to lose track that for most Ottawa residents the Income Tax Return must be filed by April 30th, in other words, Friday, latest.
If taxpayers owe tax for calendar year 2009 and the tax return is filed past April 30th, a penalty of 5% of tax due is applicable along with an additional penalty of 1% per additional complete month of tardiness for a maximum of 12 months; "repeat offenders" who have filed late returns for 2006, 2007 or 2208 may be assessed a 10% penalty
Moreover, interest, which is compounded daily is also applied to the total of any tax payable and penalties. It cannot be stressed enough how costly these interests and penalties may be. Financing through late or non-payment of tax payable should definitely be a no-no. While "self-employed individuals" have until June 15th to file their return, they will nevertheless be assessed interest on any amount owed as of April 30th; similarly, persons required to pay tax by installments, will be assessed interest and penalties when the installments are not made at the due date.
What if I do not owe any taxes.
Iindividuals who do not owe taxes will not be assessed any penalties or interest. This usually happens when the employer has deducted enough income tax during the year; accordingly, if you are entitled to a refund it does not make sense not to file a return! The refund will only be paid if the return is filed.
Moreover, even persons with no revenue must file their return to receive the GST/HST rebate, child benefits and similar credits. This year Ontario residents have an additional incentive to file a return: the special transitory credit of $300 per individual and up to $ 1,000 per family related to the implementation of the HST will also only be paid if a tax return has been filed. Filing a late return will not preclude a person's right to receive such credits and refunds, but they will be delayed and definitely not paid until CRA has a return on file. In addition late returns really seem to mess up the system and persons may then have to wait many months to receive their benefits. In addition, late filing increases the "chance" of being selected for audit, a process usually as welcomed as a visit to the dentist. So why wait? File in time.
A few numbers...
Interestingly, Kareen Dionne of CRA explains that an average of 26 million tax returns are filed each year in Canada. 50% of these are filed in the last two weeks before the deadline. Obviously, persons entitled to a refund tend to file earlier. Approximately 60% of tax returns file result in refunds averaging $ 1,500. As of April 22, 2010, 10 million Canadian taxpayers had already received their tax refunds for a total of $14.8 billions!
Let's repeat it one more time: if you are entitled to and want to receive your GST/HST credit, child care benefits and the special one-time transition credit related to the implementation of HST on July 1st, it is mandatory to file a tax return. Might as well do it on time....
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