Life gets busy, and sometimes forgetting to file your tax returns can happen. However, not filing can become a serious problem, which means it’s necessary to take action immediately. The Canadian Revenue Agency will eventually prepare a tax return based on the information they have at hand. They have to ensure their debt will be paid and may go through various processes to do so, including set-off, garnishment or registering your debt with the Federal Court of Canada.
What can you do if you haven’t filed yet? We’ve comprised a comprehensive guide on solving your tax return problem:
Voluntary Disclosure Program
The CRA has a Voluntary Disclosure Program that is specifically designed to allow people to file their tax returns or change the information of a return that was filed. By using the Voluntary Disclosure Program, you will be responsible to pay the correct amount of tax plus all or a part of the interest that otherwise applies. However, the CRA may waive penalties that may otherwise apply if the Voluntary Disclosure Program has not been utilized. This is explicitly for anyone who has yet to be contacted by the CRA. However, the longer you wait to declare, the higher the chance of the CRA contacting you sooner. The program allows for the opportunity to settle your debt issues prior to the CRA coming for you. The disclosure must be voluntary, fully completed and accurately report your income and information that has been a year past due.
Waive Penalties or Interest
If you’ve filed late in the past, you may request to have your interest and penalties waived. To do this, you must complete the RC4288 Form and send it to the CRA. However, this form can only be used for one of your ten tax years previously. When you fill out the form, include the year you’re referring to and select whether you want the penalties, interest or both of them waived. You will then have to explain to the CRA why the return was late in the first place. The only reasons that qualify for the CRA to waive them include actions by the CRA including delays; extraordinary circumstances such as medical emergencies, mental emergencies, illness or death in the family, and natural disasters; or an inability to pay due to financial hardship (see Payment Plans next)
The CRA has a payment arrangement for people that cannot pay their tax debt in full when required. The plan allows you to make smaller payments over time until the entirety of the debt is eventually paid. Before making an arrangement, you have to prove to the CRA that you have tried in the past to pay off your debt by borrowing money or reducing spending. This will require proof of income, expenses, liabilities and assets. However, if the payment is missed, the CRA may cancel the payment arrangement entirely and take immediate action to recover the debt.
Leave it to the dedicated and professional small business tax accountants at Campanella McDonald LLP to help with your tax needs. Our accounting firm located in Oakville has been assisting clients with personal, corporate, trust/estate tax compliance since 2002. We even offer tax preparation services to help smaller businesses understand tax minimization strategies and more. Want to learn more about our tax or accounting services? Send us an email today!