types of business structures and their filing requirements.
4. Filing Deadlines
The following sections discuss the filing deadlines for the different types of returns. (For business income tax returns, see Chapter 4 for information about the various types of business returns and their deadlines.)
4.1 Individual income tax return
Individuals are required by subsection 150(1) of the Income Tax Act to file tax returns no later than April 30 for the previous year. This deadline is extended to June 15 for the previous year if the individual, or the individual’s spouse or common-law partner is self-employed or carries on a business. Although the deadline is fixed, exceptions to the rule do exist:
• When the due date is not a business day, such as a holiday or weekend, returns may be submitted by the next business day.
• Non-residents filing returns under section 217 must file by June 30 for the previous year.
• Self-employed individuals, their spouses, and common-law partners must file their returns by June 15 for the previous year. This does not change the April 30 due date for any GST or HST owing.
• Deceased individuals and their surviving spouse must have their returns filed. The date is extended to six months past the death of the individual, or by the regular filing, whichever comes later.
4.2 Partnership information return
Partnership information returns that follow a fiscal period that end December 31 are filed by March 31 for the majority of partnerships. An exception to this due date is if the March 31 filing deadline falls on a public holiday or a weekend, so long as it is postmarked by the next business day, or the filing and payment are received by the CRA by the next business day, it will be considered filed on time.
4.3 T4 and T4A information returns
The deadline for employers filing T4 and T4A information returns is the end of February for the previous year. This includes filing both a T4 statement of remuneration paid, and a T4A statement of pension, retirement, annuity, and other income. Similar to other filings, should the due date fall on a public holiday or weekend, the return is due the next business day.
4.4 T5 information return
T5 statements of investment income follow similar requirements to the T4 and T4A filings. The information return must be filed no later than the last day of February for the previous tax year. The deadline may depend on where one resides and whether the due date falls on a weekend or public holiday. This is because holidays vary depending on the province or territory in which one resides, which in turn alters the predictability of the due date. The rule of thumb in such a scenario is that the information return is due the following business day.
If the business activity ends or ceases to exist, a T5 must still be filed within 30 days.
5. Consequences of Not Filing
I would say that besides avoiding being a criminal in the traditional sense by not killing somebody or not stealing a car for example, filing one’s tax returns is probably the best way of avoiding obtaining a criminal record. It is so easy. File your returns and don’t get a criminal record for failure to file. Unfortunately, many Canadian taxpayers simply do not get this subtle point.
Many people are scared to file because they know that they cannot afford to pay the taxes so they risk a criminal record by not filing. What they fail to realize is that not paying their taxes is not illegal; they cannot get a criminal record or be imprisoned for it. However, not filing their taxes is illegal.
The many consequences associated with unfiled or late-filed tax returns are unfortunate, and are likely to occur in most instances of late filing. In the case of unfiled returns, if taxes are payable, many CRA employees will automatically assume that the taxpayer is evading the payment of taxes by not filing his or her returns. Sometimes the CRA is right, and other times a taxpayer has every intention of paying, but gets in trouble nonetheless.
Typically, when the CRA discovers that a taxpayer has failed to a file return, it will send a letter requesting that the taxpayer file any outstanding returns. If the return is not filed by the deadline, employees at the CRA can decide to either arbitrarily assess the taxpayer (a process in which the CRA makes a guess at the tax owing — usually it is much more than the actual tax owing), in which case the taxpayer must either object or file his or her return to correct inconsistencies, or the CRA may issue a requirement to file a return. In this case, failure to produce the return can result in a referral to the Public Prosecution Service of Canada for charges, and a trip to court for a trial.
The CRA learns about failures to report income from a variety of sources including anonymous tips, information gathered from financial institutions, and other taxpayers during the course of an audit. The CRA has been known to find undisclosed earnings, such as finding information about third-parties or employees during an audit. This could include instances of bonuses being paid yet undisclosed, or other earnings that do not match between parties.
5.1 Interest accrual
If you have unreported income, you can expect to pay interest on that income. Interest accrues from the date disclosure or when the filing should have occurred. The interest rate fluctuates each quarter. It is always higher than bank interest, so using the CRA as a lender is not a wise choice. Since interest accrues from the filing due date and is compounded daily, it does not take long before your taxes become difficult or impossible to repay. Since a debt to the CRA can double in as little as seven years depending on the interest rates, you can imagine how many people have been led to financial ruin or bankruptcy as a result of late filing.
5.2 Penalty imposition
The CRA’s late filing penalties are designed to be tough, and I have heard of a great deal of taxpayers who have lost their homes or who have had to declare bankruptcy because of the penalties.
If a taxpayer has not filed his or her taxes, he or she will automatically be subject to a late-filing penalty. Late-filing penalties are applied automatically when late returns are processed, although they can be reduced after the fact through a request for taxpayer relief, but they are not discretionary and outside of the protection of the Voluntary Disclosures Program (see Chapter 10 for more information).
Penalties vary depending on whether the taxpayer is a repeat offender. If penalized for the first time, the taxpayer is penalized 5 percent of the balance owing in addition to 1 percent of the balance owing for every month it is late to a maximum of 12 months. If, however, the taxpayer is a repeat offender, the penalty doubles to 10 percent of the balance owing in addition to 2 percent of the balance owing for every month it is overdue to a maximum of 20 months. Furthermore, penalties are charged interest, which are compounded daily.
5.3 Fines or imprisonment
The CRA can have the taxpayer charged for tax evasion. It can come in the form of a charge for failure to file or tax evasion. If the taxpayer is unsuccessful at trial, besides obtaining a criminal record which will follow the taxpayer for the rest of his or her life unless he or she obtains a pardon, the loss of a trial can mean
