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Tax Season is Here . . .

March 27, 2013 - 0 comments

We have good intentions to get at our tax returns and get them filed on time. But sometimes before we know it, the filing deadline has passed. But at what cost?

Based on rates in effect for the second quarter of 2013, if you file your tax return late and owe funds to CRA, you will be charged at two levels:

  1. 5% of the amount of tax owing, compounded daily, plus
  2. 1% of the balance owing for each full month that your return is late, to a maximum of 12 months

These amounts could double if you have filed late in prior years.

Even if you cannot pay the total amount owing by April 30, you should at least file your return. This will eliminate the 1% per month portion of the penalty.

 It is important to note that the 5% rate is part of CRA’s prescribed interest rates, which are set quarterly. All historical rates can be found on the CRA website.

 Note too, that CRA will credit interest on tax refunds, with the calculation starting on the latest of:

  1. May 31, 2013
  2. 31 days after you file your return
  3. The day after you overpaid your taxes

The interest rate for credits is part of CRA’s prescribed interest rates. As of the second quarter of 2013, the credit rate is 3%, compounded daily. Should you receive credit interest, it is taxable in the year of receipt.

Even if you anticipate a refund, you are strongly advised to file your return on time. In the event your return is reassessed in the future, resulting in you owing tax, the filing date will be reviewed and you could be subject to late filing penalties on the new amounts owing.
 

By: Kathleen Clough with 0 comments.
Filed under: Income Tax
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