In the fray of the pandemic, tax filing deadlines have come and gone, with the most recent being the June 1 personal tax filing deadline. Governments have been committed to keeping tax benefits flowing based on the 2018 return and will even waive late filing penalties and interest for failure to file. But a big reckoning is coming at midnight on September 1.
Recipients of benefits like the Canada Child Benefit and the GST/HST Credit, OAS and GIS, who have failed to file their tax returns in June are particularly affected. The benefit year for those amounts starts on July 1, based on the 2019 tax year. But if you fail to file this month, those benefits will be based on the 2018 income reported by the family and are considered to be “estimated benefits”.
Be clear: you must still file a 2019 tax return by September 1. But, if the government cannot assess your return by early September 2020. you will be required to repay the estimated benefit amounts you got starting in July. Worse still, your benefits will stop entirely in October.
Bear in mind that not only will tax returns and remittances be due on September 1, but so will the June 15, 2020 quarterly remittance. Two weeks after that, September 15, another quarterly remittance is due. Penalties and interest will add up fast, for those who cannot pay or repay. Expect to receive lots of communications and assessment notices from CRA by the end of September.
But it gets worse: in provinces where property taxes and other provincial payments were postponed, the fall will attract even more of a cash crunch. It’s a message tax and financial advisors must get out to clients before the summer hiatus.
The money moral. The message to procrastinators is this: file your tax returns before the summer and start saving for an expensive fall. The traditional “back to school” time also means back to tax time. As important, start planning to reduce your 2020 taxes. . .which will be due a short 11 months from now!
P.S. Your tax advisor will also likely be in a better position to help (and quite possibly in a better mood) now than when you show up with your shoebox on August 29.
Additional educational resources: Become the invaluable resource Canadians need to navigate the tax pitfalls relating to the COVID-19 Emergency Response Benefits and much more. Until June 30, get access to the September 30 Virtual CE Summit for free when you enrol in a Knowledge Bureau Designation Program. Consider the DFA-Tax Services Specialist™ program, or become a Real Wealth Manager™.
COPYRIGHT OWNED BY KNOWLEDGE BUREAU INC., 2020.
UNAUTHORIZED REPRODUCTION, IN WHOLE OR IN PART, IS PROHIBITED.