Most of the reasons Canadians file late (or not at all) is due to misunderstanding of the requirements for income earning citizens. We have identified some important information for Canadian taxes payers to ensure they are compliant with the Canada Revenue Agency (CRA).
You may not be required to - There actually is a small minority who are not required to file one. Children under 16 are a great example as well as spouses who are at home full time and have little/no income. Those deemed non-residents and cleared estates after deceased returns are filed are also good examples.
Missing information- Whether you were employed, self-employed or not working at all, you usually require a certain amount of documentation to file a return. In a case that you had no reportable income, you generally only need your basic personal information like your name, address, SIN, date of birth, marital status, etc.
You have not been asked to- CRA generally don’t ask a late filer to file right away and can take a few years before they catch on. Some may actually get away with it for many years because there is no absolute way to tell if the taxpayer has moved out of the country, stopped working or died.
Deferring refunds & benefits- Some taxpayers perceive their refunds as an annual windfall and treat their tax account like a savings account in a bank. There is nothing legally wrong with this as long as you realize your giving the government an interest free loan with no benefit to you.
Not sure of their situation- In a family situation, it’s quite common for a spouse to handle the filings for two or more people without the others being too aware of the occurrence. Now suppose this spouse leaves or dies, then unfiled returns can go on for years before they realize that they haven’t got a refund, GST credits or a “request to file” letter shows up one day in the mail.
May owe a lot of money- This is quite common for those who are self-employed and have not paid tax installments to ease the bite at tax time. Before you assume you owe a lot, you should speak to a tax professional. In many case, they can use deductions, past losses and expenses the average person doesn’t think of to lower their liability. Also, the CRA has a variety of programs such as Voluntary Disclosure and the Fairness Act to possibly eliminate interest/penalties normally applied on top of balances owed.
Believe taxes are optional in Canada- Many naive or underhanded people fall into this trap. The truth of the matter is every level of government has the right to tax its residences’ and/or user of services accordingly. There is no such thing as “optional taxes” for the simple reason. Guess which option people would choose? Common sense tells you governments require tax revenue to fund its expenses and operations which generally benefit the population. While some countries like the Bahamas and Cayman Islands are income tax free, most aren’t and deliberant non payments are considered evasion which is prosecutable.
Avoiding claims on your refund & benefits- Taxpayers who owe other government agencies or authorized claimers monies from previous unpaid liabilities may have the right to the refund/benefits before the taxpayer. If the taxpayer is aware of this, they may put off filing until they are either settled or with hopes of them disappearing. Unfortunately the latter rarely happens and usually a tax professional CAN’T help you. You should get a hold of the appropriate agencies and see what is required to settle these balances and ensure what they claim is in fact accurate. Please be aware that some agencies like maintenance enforcement and student loans are exempt from bankruptcy laws and you have to pay them no matter what!
Tax treaties & exemptions- Depending on the treaty, certain individual are exempt based on their country of residence or birth status. Employees on a temporary work visa are actually still employed by the parent company outside of Canada, but they are living and getting paid in Canada strictly because of their work. These individuals should discuss their situation with the International Tax Office in Ottawa (613) 267-5177 as they may still be required to file to qualify for the exemption. Most card carrying First Nations residents are exempt from paying income taxes, but certain rules do apply like earning the money on a reserve, which is usually marked on the T4. Also, benefits like GST and Child Tax Benefits are still subject to a filed tax return, so they are still obligated to file if they want to receive them!
PROCRASTINATION!- Now you just know this was going to show up and actually this is by far the #1 reason. So why did I leave it for the last? Well, because there actually are legitimate reasons why people don’t file, but unfortunately laziness is WAY ON TOP of the heap. Let’s face it, if there was a polite way of saying it, I would have, but there really isn’t. Someone once told me that procrastination is death on the installment plan; well put! Now don’t get me wrong, all of us have delayed at some point, but the bottom line is you either conquer it or its conquers you.
Thanks, Neel!
About PTC Canada (www.ptccanada.com)
PTC Canada believes in helping the client and taxpayer whenever they can, simply because we work for you and nobody else. This free tip sheet, which will save you several thousands of dollars, is just a sample of our business philosophy. We are very hands off in our marketing and hands on when we work for you. Our client like us because of the results we achieve for them and top notch service that accompanies it. Join our free mailing list today which gives you updates of the tax events and unique products/services we recommend to ease the tax burden.
Why Over 1 Million Canadians file their taxes late every year - To learn more about this author, visit Neel Roberts's Website.
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