Millions of Returns Outstanding: Many Owe
The pressure is on! Taxpayers and their tax accountants are buckling under the strain of lockdowns in the midst of a very a complex tax season. Recent statistics from CRA show that we were only at the halfway point on April 19 as only 16.6 million of approximately 31 million tax returns expected had been filed. It’s notable too that 19% of tax filers have a balance due. Here are nine last minute tax tips for those who owe and those who have to break it to them:
If you didn’t collect pandemic relief, and you were not self-employed:be sure to file by midnight April 30 to avoid late filing penalties and interest.
- If you did collect pandemic relief payments like CERB or CRB, file on time to avoid late filing penalties, but know that you can avoid interest costs for a full year as long as your income is under $75,000.
- If you are self-employed and unincorporated, you have until midnight June 15 to file a return and avoid late filing penalties. However, interest costs will arise if your income is over $75,000, or if you didn’t collect pandemic relief benefits and earned below $75,000.
- If you can’t pay, file your return anyways and make arrangements to pay over time.One good reason:CRA will be stepping up collections based on funding received in the April 19 budget.Here’s another:interest costs are likely lower on your operating line.CRA charges the prescribed rate of interest (currently 1%) plus 4% more.
- Behind on your tax filings?Get caught up!CRA may owe you a refund from prior years, as well as refundable tax credits, and that can help to pay for this year’s balance due.
- Every adult in the family should file.While the T1 return is about reconciling your income, deductions, credits and taxes paid to determine whether you owe more, or will receive a refund for overpayment.But it’s also about receiving the most from refundable tax credits, Old Age Security (those age 75 next year will receive a raise and a one-time bonus payment of $500 this August), Canada Child Benefits, Canada Worker’s Benefits, and GST/HST credits.That’s tax fee money families can make good use of.
- File for children, too.Anyone with earned income from RRSP purposes should file a tax return to build up RRSP contribution room.That includes minors who have snow shoveling, gardening, modelling, refereeing and other gig economy jobs.It will help them become better investors too, if they understand the rules behind creating the tax-sheltered room to build a tax-deferred future income.
- Put your refund to good use.Leverage the return by depositing it into your Tax-Free Savings Account (TFSA) or an RESP for the kids.
- And our last tip is for your tax specialist:stay well, and try to get some sleep, but remember, TGIF this week coincides with the end of the first tax filing deadline of the year.
Evelyn Jacks is President of Knowledge Bureau and author of 55 books on tax filing and wealth management. Follow her on twitter @evelynjacks