Doing your taxes likely doesn't rate high on the fun scale, which is probably why so many of us put it off. You might be more inclined to file on time if you know you're receiving a return, but whether money is owing or owed, there are good reasons to file on time. There's also good reason to scour your home for any documentation to support your claims.
Claiming what you are entitled to can really boost your bottom line. If you did repairs around your home last year and spent $2,000, you might be entitled to a credit of $150. If your child is in sports and you can produce $500 worth of receipts, that's a credit of $75. If you've made donations of $200 to your favourite charities, you're entitled to a $30 credit. Point is, when you file late or miss something seemingly trivial, you're leaving money on the table for the government to pick up and pocket.
Some additional unpleasant financial consequences of late filling are listed below. If you were likely to be lumped in as a late-filling stat for the 2009 tax season, this might just motivate you to meet the April 30th deadline.
Late fees If you or your partner is self-employed, then you have until June 15th to file a return. However, if you have a balance owing, the Canada Revenue Agency (CRA) will charge you interest on the outstanding balance as of April 30th. If you have a balance owing, you will also be charged a 5 per cent late-filing penalty after the 30th. Come May 1st, for example, someone who owes $2,000 would have an additional $100 tacked on for tardiness. Next, an additional 1 per cent of your balance owing is charged for each full month your return is late, to a maximum of 12 months. After this, your bill might be sent to collections. The government also keeps track of late filings. If you've filed late once in the past, even if you were expecting a return, the government views your second late file as an offence that could translate into a penalty fee as high as 10 per cent.
Interest charges The interest you receive from the government on your refunds is currently 2 per cent lower than the interest you are required to pay if you owe money. The rate of interest can change every three months. You can see current prescribed interest rates on the CRA site. Interest on refunds will be paid only starting from whichever of the following three dates is latest: May 31, 2010, the 31st day after your return or the day after you overpaid your taxes. The interest stops accumulating on the date listed on your notice of assessment. The average return for 2008 was $1,500. If you wiped out $1,500 in credit card debt, you'd save yourself more than $1,900 in interest payments, if you were making minimum payments of 2 per cent monthly with an interest rate of 16 per cent. Run your specific numbers at www.bankrate.com and consider how investing a potential return makes a difference.
Help for late filing There are options available if you can't afford to pay your entire tax bill. Calling the CRA at 1-800-959-8281 and speaking with an agent (press * to speak with an agent immediately) gives you the chance to work with somoene to set up a realistic repayment plan.
Filing an adjustment If you think you've missed something, you can always file an adjustment on your return after April 30th. To do so, you will need to set up an account with the CRA. After you create an account, simply chose the 'change my return' option. Setting up an account means you'll be able to enter and submit changes to your most recent income-tax return or to returns of the previous two years. If it's after two years you'll have to make your claims through the mail. You can claim adjustments on returns as far back as 10 years. To do this, you'll need to fill out a T1 adjustment request. When you have an account you can gain free access to all your tax information in one spot. You check on the progress of your refund, track your GST/HST credit payments and change your personal information.
We've all been guilty of procrastination. This type of procrastination, however, can come with a hefty price tag. You've got to file your taxes eventually, so you might as well make the deadline and avoid late filing fees. You've got a little more than a month to get organized. Maybe you need to do a little bit every day, or cram it all into one afternoon. But filing late doesn't serve any purpose, except for taking money out of your hands and putting it into the taxman's pocket.