If you file your income tax returns late, it can cost you a lot of money in Canada. The CRA will charge you tax penalties and interest Canada on the amount of tax which is unpaid if you owe them income taxes and file your returns late. It is better to file on time even if you are missing some information to avoid tax penalties and interest Canada. Changes can be filed to the income tax returns at a later date.
If you have an unpaid tax balance for the current year, daily interest is charged on a compound basis with effect from 1st?May next year. This will include all balances that you owe when the returns are reassessed. Additionally, interest will be charged on the penalties beginning with the day that your return falls due. The rate of tax penalties and interest Canada can change once in three months.
If there is any amount that is due from the previous years, compounded daily interest will be charged on those figures. The payments that are made by you are applied initially to the amounts that are owed from the previous years. Tax penalties and interest Canada may be cancelled or it can be waived in extraordinary circumstances or if financial hardship is proven.
Tax penalties and interest Canada for late filing will be 5% for the balance due for the current year and an additional 1% for the balance due for each month that your tax returns become late up to a maximum of one year with a maximum penalty of 17%. If there is a late filing penalty for the past three years, then the penalty is 10% with an additional 2% for each full month that your return is late. It is always better to avoid the penalty for late filing by filing your tax returns on time even if you are not able to pay the full amount of the tax balance on or before 30th April 2014.
In case of penalties, the requests that are related to the tax years ending in any of the ten calendar years before the period in which you request may be considered. To cite an example, a request that is made in the current year of 2014 has to relate to a penalty for the year 2004 or a later tax year.
There is a penalty involved if it is proved that intentionally or due to negligence you have made a false statement or an omission on your tax returns. The tax penalties and interest Canada in such cases will be equal or greater of one hundred dollars or half of the understated tax or the overstated credits that are related to the false statements and omissions. However, this penalty could be waived if you make a voluntary disclosure about amounts which you failed to report or about any credits which you have overstated.
The theory of increased tax penalties and interest Canada is now fixed in the Income Tax Act. People just cannot forget the interest that could be levied if they fail to submit the correct amount of income tax installments.