FINANCIAL TROUBLE? WE CAN HELP!
LICENSED INSOLVENCY TRUSTEE SERVICES & DEBT CONSOLIDATION

click to Book a free consultation
or CALL TO BOOK AT 1-888-329-5198

How Much Does CRA Charge in Penalties and Interest?

Posted by in Bankruptcy
24
Jul 2014

If you owe money to the Canada Revenue Agency (CRA), you must take steps to avoid late payments. Any late payments owed to the CRA are subject to interest and penalties. Payment must be made by May 1, 2015 for the 2014 tax year. Additionally, any incorrect (falsified) tax returns will be penalized.

Correcting Tax Mistakes

Please note, the due date is normally May 1, however for the 2013 year it was changed to May 5, 2014 to accommodate the 5-day interruption to CRA service caused by the Heartbleed Bug. There are special cases where CRA can cancel or waive penalties or interest under the “Taxpayer Relief Provisions” but it does not happen often so always pay close attention to deadlines to help minimize the amount you will owe.

Penalties

The CRA charges several penalties. You must find out what you owe, and when it is due, to avoid these additional fees. Even if you know you cannot afford to pay the entire amount on time, by filing on time you will avoid some additional penalties.

Late filing penalty

Late filing penalties are 5 per cent of your balance for 2013, plus an additional 1 per cent of your balance for each full month until you file your return. This penalty increases monthly for 12 months. Also, if you were charged late filing penalties for 2010, 2011, or 2012 the CRA will charge you a 10 per cent late filing penalty for 2013, plus 2 per cent for each full month until you file.

Late filing penalties can be waived by the CRA if you have extenuating circumstances.

False statement or omissions penalty

If the CRA believes you knowingly falsified your tax return, you will be charged the highest amount of either 50 per cent of the falsified amount, or $100.

Repeated failure to report income penalty

If the CRA discovers that you failed to report an amount on your tax return, you will be charged a penalty. Failing to report an amount for previous years will be added to the amount you owe.

Correcting tax mistakes

If you discover that you made a mistake on your tax return, for instance by not declaring interest on income, you can correct the error without penalty. You can file a voluntary disclosure to the CRA, and you will only owe your taxes plus interest. This voluntary disclosure must be made before the CRA takes action against you. It can only be made after the information is a year overdue, so there will be interest.

Interest Rates

The CRA charges compound daily interest on your outstanding balance remaining after May 5th. The rates of interest can change every three months. The current rate for personal income taxes is 5%. This compound daily interest will be added to amounts owed from previous years, and any penalties the CRA charges you. Remember interest is not only charges on the amount you owe but also on any penalties you have incurred.

Post Comments

Leave a Reply

Your email address will not be published. Required fields are marked *