Last minute tax filing tips

desk stacked with tax forms and office supplies

April 30 tax deadline

For most of us, the tax filing deadline is April 30. Despite rumours that we will get another extension like last year, there's no reason to believe that is going to happen this year.

There are a lot of reasons to file your taxes on time:

  • GET YOUR REFUND BACK: Who wants to loan the government interest-free money that is owing to you?

  • AVOID PENALTIES: Penalties are calculated as a percent of what you owe in tax, so if you have been filing your taxes on time in the last 3 years, you will owe an additional 5% in penalties. An extra 1% per month for every month late after that up to 12 months is tacked on, up to a total of 17%.
    However, if you were late in any of the 3 prior years, that penalty goes up to 10% plus 2% per month up to 20 months. That could come to a whopping total of 50% of your taxes!
    Also note that interest is calculated on the taxes you owe PLUS the penalties. That hurts.

  • GET YOUR BENEFITS: a lot of benefits and credits depend on filing your income taxes on time, including: Canada Child Benefit, Guaranteed Income Supplement, GST credit, and COVID-19 recovery benefits.

  • INTEREST RELIEF: If your total taxable income in 2020 was $75,000 or less and you received at least one COVID-19 benefit in 2020, you will automatically receive interest relief on your 2020 taxes owing. You will not be charged interest until April 30, 2022. BUT, you have to file your return by April 30, 2021. 

  • SLEEP BETTER: Who doesn't feel better knowing the tax man is off your back?

June 15 tax deadline

For those with self-employment income and their spouses, the deadline for filing taxes is June 15.

However, if you owe any taxes, and the self-employed often do, then interest on what you owe starts as of May 1 (not June 16). So making an estimate of what you will owe and paying an installment by April 30 might be a good idea, to avoid paying any interest to our dear Canada Revenue Agency.

 

A note from your friendly neighborhood accountant on the psychology and strategy of filing and paying your taxes:

Filing and paying your taxes can be a painful experience. Some of us feel like saying, 'well they can pry it out of my cold dead hands' or something similar. 

But on the whole, the pain of NOT filing your taxes is greater than actually doing it. You can save a lot of money in penalties and interest. You can manage your finances better by knowing what you owe. You can often get money back that is owing to you.

Even if you owe, you can almost always work out a reasonable payment arrangement with Canada Revenue. That is especially true in this time of COVID. 

If you need to, get help with your taxes. It may cost you a little, but it will be worth it in the long run.