Canada Revenue Agency (CRA) imposes various penalties and interest to encourage people and corporations to file tax returns and pay taxes on time.
Here are a few of the penalties and interests imposed by CRA:
- Interest on unpaid amounts owing.
- Late filing penalties.
- False statements or omissions penalties.
- Installment interest and penalties.
- Missed T slips penalties
In a perfect world we would all file on time and pay the taxes that are due. In the real world that isn’t always possible but:
- Late filing penalties can be avoided by filing on time. You are going to have to file at some time so, even if you can’t pay the tax now, you should file your tax return.
- The current penalty for late filing is 5% of the balance owing plus 1% of the balance owing for each full month that the return is late, maximum 12 months. If you have been charged with a late filing penalty previously the percentages could double.
- If you file on time but can’t pay on time you at least avoid late filing penalty. You will be charged interest until you have paid the tax but you will be charged late interest even if you file late.
- Interest on unpaid amounts can be avoided by prompt payment but if you are unable to pay the whole amount contact CRA to arrange a payment plan. CRA is generally cooperative with reasonable payment plans.