People in Canada are not fully aware that they will be charged heavy penalties by the CRA for tax unfiled and late filing. The penalties become hefty, particularly for defaulters who become repeat offenders. So, if you owe taxes and are not filing your tax returns on time, you can expect first time late filing charges to be up to 17% of the tax amount due to the CRA. When the late filing incident is deemed as a repeat occurrence, the penalty can even be hiked up to 50% of the tax amount due.
Apart from the penalties for tax unfiled and late filing, the interest charges on the tax amount balances are much higher than the rates charged by the banking institutions. These interest charges are compounded on a daily basis. When people pile up back taxes for several years, it will not be surprising to observe that the penalties and interests will make up more than half the amount of the actual tax amount payable. The interest keeps piling up at an alarming rate.
Late filing and tax unfiled may even result in criminal charges against the defaulters. Despite this threat, many individuals and business owners in Canada have problems of tax unfiled. One of the principal reasons why the taxes may not be filed on time is because many people feel that by filing of the tax returns, they may owe amounts which they are not in a position to afford to pay. This problem gets more complicated as tax arrears pile up for more than one period of assessment.
?People with tax unfiled require services of a firm of tax accountants or tax service providers. The cost of hiring these services is worth it for the experience and the knowledge that these providers possess. Under Sections 238(1) and 239 (1) of the Canadian Income Tax Act, tax unfiled or late filing for a period beyond one year for a tax amount due is a criminal offence.? Failing to declare income which is taxable or concealing it is an offence which is punishable by financial penalties as well as by imprisonment.
Most people make the mistake of thinking that they are off the radar with tax unfiled; but, that is not the case. CRA keeps a tab by monitoring the financial behaviour over a period of time. They use identification tags like Social Insurance Number or the date of birth of a person to access data from the bank accounts, credit card transactions or the acquisition of property or any other possessions. The longer they allow a taxpayer for tax unfiled, the higher is their revenue generated in the form of penalties and daily interest on the tax amount payable. The longer the period of tax delinquency is stretched, the easier it becomes for the CRA to establish a criminal case for evasion of tax.
Once a person is convicted for tax unfiled, the penalties can soar as high as two hundred and fifty per cent of the actual tax amount due to CRA in addition to the daily interest compounded charges. Imprisonment could involve a jail term of up to two years. The taxpayer?s reputation also gets tarnished with this kind of a criminal record for tax unfiled.