The Importance of Canadians Filing Their Taxes: Consequences of Non-Compliance 

_{By Stephen LeManne,  Bromwich+Smith Staff | 1116 words | Reading Time: 5 minutes and 20 seconds| Date: 2024/02/20}

It’s time to talk about everyone’s favorite topic income taxes! Taxes are payments made to the government which help fund programs ranging from education and health care to local schools and road repairs. Paying taxes is a requirement and not something that you can opt out of doing.  Through the year, and depending on where in the country you live, you could pay taxes in many forms:  Goods and Services Tax (GST), Provincial Sales Tax (PST), Harmonized Sales Tax (HST), property tax, federal and provincial income tax, customs duties or tariffs or even health services taxes.   

The phrases “time to do your taxes” and “tax season” refer to that time of year, generally between sometime in February and the end of April, in which you need to file your annual income tax returns. The Canada Revenue Agency (CRA) is the federal body which collects federal income taxes as well as income taxes on behalf of the provinces and territories (except for Quebec). 

Besides it being an obligation, there are many benefits to filing your tax return: 

• You may be eligible for a refund, or to recover any taxes that you may have overpaid from your pay cheque.  

• If you owe money, paying your balance on time allows you to avoid any interest charges. 

• You may be eligible for certain benefits or credit payments such as the GST/HST credit, Canada Child Benefit (CCB) or Guaranteed Income Supplement (GIS). Filing your taxes also confirms your income level to help determine your Old Age Security payments (OAS). 

• Filing your taxes each year increases your RRSP contribution limit.  Any contribution room you have left over each year carries over to the next year. 

Once you’ve filed your annual tax return, if you have a balance owing to the government, payment is due on or before April 30. If you are unable to pay by that date, the CRA has programs in place where you can arrange to pay your debt down over a scheduled series of payments as a payment arrangement. Make sure to contact them, as otherwise you’ll be charged interest if you are unable to pay the full amount on time. It’s always best to file on time and contact them to figure out your options.  

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If you don’t file your taxes before the deadline, there are consequences. If you owe a balance, you could be subject to some hefty penalties, which increase the longer you take to file.  As of the 2022 tax season, the CRA will charge 5% of the balance owing, plus an additional 1% for each full month that you file after the due date, to a maximum of 12 months.  These penalties could lead to a large increase to your tax bill, so please look at getting your taxes filed before the deadline.  In addition, filing your taxes determines your eligibility for certain government benefits and payments, so not filing could lead to you not receiving those payments.  

So what can you do to prepare yourself for tax season?  Well in some ways, preparing for tax season happens all year long.  First, understand the key dates so you can work backwards towards that date, and so that you don’t miss a deadline.  These key dates include the first day you can file, the deadline for filing (usually the last day of April, but can change depending on weekends), and the deadline for any RRSP contributions. 

Then, make sure to put aside all of your important receipts in one place.   This will save you from having to remember what receipt you have and then searching for them when tax time approaches.  Depending on your personal situation, these receipts could include (but are not limited to) RRSP contribution receipts, professional or union dues, charitable donations, interest paid on student loans, employment expenses, childcare receipts, or medical expenses.  

Finally, when tax time rolls around, choose the best option to file.  There are many options available to you. 

• Fill out a paper tax return if you like putting pencil to paper. 

• Visit a tax preparation company and have the pros do it for you.  Some have a variety of options for how you can pay or how you can receive your return. 

• Do it yourself online. You’ll pay a fee depending on the complexity of your return.  If it is simple enough, you may even be able to file for free. 

• For those individuals that qualify, there are free community tax clinics hosted across Canada through the Community Volunteer Income Tax Program (CVITP) and the Income Tax Assistance - Volunteer Program (ITAVP) in Quebec. 

It’s never too late or too early to start collecting those receipts, making those RRSP contributions and creating an understanding about how you want to file.  Once tax season finally opens, get those returns in early to speed up your return, qualify you for those government payments and ensure that you don’t pay any penalties associated with later filing.  Happy taxes everyone! 

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FAQs:

1: How can filing taxes benefit me, besides fulfilling my obligation to the government?

Filing taxes can make you eligible for a refund, help recover overpaid taxes, and qualify you for benefits like GST/HST credit, Canada Child Benefit, and Guaranteed Income Supplement.

2: What happens if I don't file my taxes before the deadline?

If you miss the deadline, you may face penalties. The late-filing penalty is 5% of your 2023 balance owing, plus an additional 1% for each full month that you file after the due date, to a maximum of 12 months.

3: How can I prepare for tax season throughout the year?

Understand key dates, organize important receipts (e.g., RRSP contributions, professional dues, charitable donations), and choose a filing option that suits you, whether paper, professional services, online filing with fees, or free community tax clinics.

4: What are the consequences of not paying the balance owed by the tax filing deadline?

Failure to pay the balance by April 30 may result in interest charges. The CRA offers payment arrangement programs, but it's crucial to contact them to avoid penalties and interest.

5: How does filing taxes impact my eligibility for government benefits and payments?

Filing taxes is essential for determining eligibility for government benefits and payments. Not filing could result in not receiving certain benefits, so it's crucial to file on time.

6: What receipts should I keep aside when preparing for tax season?

Save important receipts, including RRSP contribution receipts, professional/union dues, charitable donations, student loan interest, employment expenses, child care receipts, and medical expenses.

7: Can I file my taxes for free in Canada?

Yes, there are free options available. Individuals qualifying for the Community Volunteer Income Tax Program (CVITP) can utilize free community tax clinics.

8: What are the consequences of not paying the balance owed by the tax filing deadline?

Failure to pay the balance by April 30 may result in interest charges. The CRA offers payment arrangement programs, but it's crucial to contact them to avoid penalties and interest.

9: How does filing taxes impact my RRSP contribution limit?

Filing taxes increases your RRSP contribution limit. Any contribution room left over each year carries over to the next, providing an opportunity for future contributions.

10: Can I arrange a payment plan if I can't pay my tax balance by the deadline?

Yes, the CRA has programs allowing you to arrange a scheduled series of payments if you're unable to pay your tax balance by April 30. Contact them to discuss your options and avoid additional charges.

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About Author

Stephen LeManne
Manager of Financial Services 

Stephen LeManne is the Manager of Financial Services for Bromwich+Smith.  The teams which he is responsible for handle estate receipts and distributions, file and tax preparation for our clients.  After leaving the office for the day, Steve flips to hockey parent mode as he and his wife spend countless hours each winter watching their two boys play the game that they love.