It’s easy to ignore taxes until a couple of weeks before the filing deadline. For individuals, the deadline is 30 April – but there are separate deadlines for corporations, and for those who are self-employed, non-resident, and even those who are deceased. We think the best approach to tax (like all financial matters) is to be proactive, and so we present our top tips for dealing with the Canada Revenue Agency (CRA) and your income taxes.
- Manage your refunds – It’s great getting a cheque from the CRA in May, but why pay all that money in advance and wait so long to get it back? By correctly filing a form T1213 with your employer, you can get the right tax code and stop paying that extra tax up front every month. Managing your cashflow on a monthly basis can smooth out your finances and make it easier to deal with unexpected costs.
- File a return regardless – I’ve met many clients who think that their earnings are not enough to merit filing a return. In fact, filing a return also means that you will be eligible for several tax credits. In addition to GST and HST credits, filing a return also ensures eligibility for child tax credits, and guaranteed income supplements for seniors. Each province (including Beautiful BC!) has its own refundable credits for certain people – but only if you file a return.
I’ve also had clients who think that if they can’t afford the taxes due, there is no point in filing a return. This is not true – not only does CRA impose a 5% penalty for late filings, it also charges 1% per month (up to a maximum 12 months) on any balance owing.
- Don’t be afraid – If you failed to declare income in previous years, it’s time to face up to it! CRA has a voluntary disclosures program, under which you will still have to pay interest on amounts owed, but there will be no penalties – or prosecution!
- Check your charitable donations – It’s such a gift to be able to give! And of course, the government helps us give, by enabling tax-deductibility of our contributions. Even if you lose a receipt, or forget to submit one, you can claim a refund on donations up to 5 years from the date of the receipt.
If you can’t pay your taxes:
- File on time – As above, late-filing penalties run to 5% of the amount owed. This just means your problem is bigger – don’t make life harder on yourself.
- Speak up – Contact your local tax services office, and ask to arrange a payment schedule. You can find a link to the Vancouver tax services office here. The sooner you make contact the better, since unpaid taxes accrue daily compounding interest, until the balance is settled.
- Ask for relief – The CRA will forgive penalties and interest in certain circumstances, through the Taxpayer Relief Program. You can find full details here, but bear in mind that it is unlikely CRA will forgive taxes owed in full.
- Contact me – if you feel like there is no way out from your situation, and none of the advice above will materially improve your situation, it is time to take decisive action. A carefully structured Consumer Proposal by someone solely representing the interests of the debtor can reduce your debt burden by up to 80%, with the residual amount repaid in instalments over the next 12 months. Under a proposal, your personal assets are protected, and creditors usually agree to some debt reduction and an affordable payment arrangement, rather than face the potential of lower recovery in a bankruptcy. Bankruptcy really is the final option, and CRA (and other creditors) will be able to make a claim on your assets. Your credit score will also take much longer to rebuild following bankruptcy, than under a Proposal.
Whichever you solution you choose, I can help represent your needs through the process and begin your journey out of debt.
Hi, I’m Jennifer Virani and I’m your 4 Pillars Debt Specialist in North Vancouver. Call me at 604-612-9211.
