When you owe the CRA money, but your cash flow is low

personal income tax vancouver, income tax services vancouver, income tax company vancouver, how to file income tax in vancouver, file income tax vancouver, business tax services vancouver, business tax return tax preparation vancouver, tax preparation company Vancouver, tax preparation services vancouver bc, e tax filing income tax return vancouver, T1 General 2016, T1 General 2016 Vancouver, tax slips, income tax slips, tax information, T4, T5, T3, missing tax slips, late tax filing, tax deadline, debt, tax debt

Once upon a time, this cup much like a bank account was filled to the brim, and a juicy olive accompanied the penniless toothpick that now quietly rests on the desk….

There is nothing quite like receiving the little brown envelope from the Canada Revenue Agency (CRA) reminding you that you have tax debt. It makes you realize this empty cup is a depressingly on-point indication of your current financial situation.

Instead of sitting around feeling sorry for yourself here is what you should do:

  • Make a payment arrangement: Call the CRA and set up an agreement to make smaller payments over time until your debt and applicable interest is paid. Ignoring the CRA will only amp up any financial and/ or legal consequences. IMPORTANT: The CRA may also charge interest compounded daily at the prescribed rate on any amount owing until your balance is paid in full.
    • Here are three ways you can work with CRA to set up a payment agreement today. Remember, no one likes to be ignored so pick up the phone NOW.
  • Considering bankruptcy? This is not a decision you should make lightly as it follows you for life. If this is an option you are considering, go to the Office of the Superintendent of Bankruptcy for more information and to discuss options before committing to this solution.
  • Are You Business owner? You might qualify for taxpayer relief from penalties and interest charges and reduce the total amount you or your business owes. See  Taxpayer relief provisions if your business qualifies.
  • Financial hardship provisions: Does your debt repayment make it hard for you to pay for food, utilities, housing, and other life essentials? You may qualify for help under the financial hardship provisions.
    • It is your responsibility to contact the CRA if repaying your debt is causing you financial hardship. The CRA will take your situation into account when reviewing your request. For more information and to see if you qualify, call 1-866-864-5823.

To ensure you don’t end up in the same situation next year we recommend talking to a tax consultant right away so that you can plan accordingly.

 

What happens if you miss the deadline to file your income tax return?

personal income tax vancouver, income tax services vancouver, income tax company vancouver, how to file income tax in vancouver, file income tax vancouver, business tax services vancouver, business tax return tax preparation vancouver, tax preparation company Vancouver, tax preparation services vancouver bc, e tax filing income tax return vancouver, T1 General 2016, T1 General 2016 Vancouver, tax slips, income tax slips, tax information, T4, T5, T3, missing tax slips, late tax filing, tax deadline

Homeroom’s Alan Chau bursts into panic mode at the thought of a missed tax deadline…Lucky for him,  the Canada Revenue Agency (CRA) opened the option to file online on February 20, 2017. So, now he’s got some time in his hands…

 

Planning on forgetting to file your tax return on time?

The result of failing to file your personal income tax return by the April 30th deadline when there is a chance you owe the CRA money can best be revealed with the scary emoji: 

It is mostly scary financially as the penalty can cost a hefty coin. Basically, your wallet will get the worst of it.

Here’s what will happen:

  1. The CRA will charge you daily interest starting one day after your return is due on any unpaid amounts owing for the year. This includes any balance owing if the CRA reassess your return.
  2. The late-filing penalty is 5% of your balance owing, plus 1% of your balance owing for each full month your return is late, to a maximum of 12 months. If you were charged a late-filing penalty on a previous return eg: 2013, 2014, or 2015, your late-filing penalty for the current year may be 10% of your balance owing, plus 2% of your balance owing for each full month your return is late, to a maximum of 20 months. That’s double the trouble!
  3. Your goods and services tax/harmonized sales tax (GST/ HST), including any related provincial credits, Canada child benefit payments (including related provincial or territorial payments), and old age security benefit payments may be delayed or stopped.

Tax Tip

Even if you cannot pay your full balance owing on or before the deadline, you can avoid the late-filing penalty by filing your return on time.

Keep open and honest communication, and the CRA will be your BFF: agreeable, reasonable and understanding. But ignore or cheat them in any way and expect a pricey strike-back.

Self-employed Individuals

If you carried on a business during the tax year, your return has to be filed on or before June 15. However, if you have a balance owing for the year, you have to pay it on or before the April 30 deadline. We recommend that all sole proprietors have their tax returns ready to go for April 30 just to be safe.

Find out how to pay the CRA here.

Happy tax season!