Evelyn Jacks: How delinquent tax filers can preserve wealthPosted: May 16, 2012
The CRA has been proactively slapping penalties on delinquents of $1,000 for each missed return, be it personal, corporate or GST.
- A real estate agent in Ontario paid $2,000 for failing to file her 2007 and 2008 personal tax returns and ignoring CRA demand notices.
- A British Columbia couple was fined $12,000 for failing to file 2006 and 2007 personal returns; four tax returns for their numbered company, five corporate tax returns and a GST return for one year.
- A New Brunswick man was fined $8,000 for failing to file his 2008 and 2009 personal tax returns and several GST returns and failing to comply with a court order.
Unfortunately, the tax pain won't end there if you have a balance due. The taxes will need to be paid along with hefty late filing penalties:
- First failure to file a return on time: 5% of the unpaid taxes owing plus 1% a month up to a maximum of 12 months from the filing due date;
- Subsequent failure to file on time within a three-year period: 10% of unpaid taxes plus 2% a month to a maximum of 20 months from filing due date.
If you try to pull any tricks when filing those late returns, the penalties get bigger:
- Gross negligence penalties of 50% of taxes payable, minimum penalty of $100, if you knowingly or under circumstances amounting to gross negligence make a false statement or omission;
- Tax evasion penalties of up to 200% of taxes payable if the CRA can prove you intentionally cheated by understanding income or overstating deductions or credits. Jail time is a possibly, too.
Interest, too, will compound daily at the prescribed rate, plus 4% on all the combined amounts due. And take note: even if you have a June 15 filing deadline for your unincorporated business, interest is due on balances as the interest clock starts ticking as of the April 30 deadline.
It's Your Money. Your Life. Up-to-date tax preparation is the mandatory first step in your wealth-management plan. Avoid big penalties and minimize interest charges by filing your late returns now. Doing so before the CRA comes after you will preserve your wealth.