Tax Survival for Canadians. Dale Barrett
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You have not repaid money withdrawn from your registered retirement savings plan (RRSP) under the Home Buyers’ Plan or the Lifelong Learning Plan.
• You have to contribute to the Canada Pension Plan (CPP). This can apply if, for the previous year, the total of your net self-employment income and pensionable employment income is more than $3,500 (as of the time of this book’s publication).
• You are paying Employment Insurance premiums on self-employment and other eligible earnings.
If none of the above reasons apply, you may still want to file for the following reasons:
• To claim a refund.
• To claim the Working Income Tax Benefit (WITB).
• To apply for the GST or HST credit (including any related provincial credit).
• You have incurred a non-capital loss in the previous year that you want to apply in other years.
• You want to or your partner (i.e., spouse or common law) wants to begin or continue to receive the Canada Child Tax Benefits payments.
• You are carrying forward or transferring the unused portion of your tuition, education, and textbook amounts.
• To report income for which you could contribute to an RRSP in order to keep your RRSP deduction limit for future years up to date.
• To carry forward the unused investment tax credit on expenditures you incurred during the current year.
• You receive the Guaranteed Income Supplement or Allowance benefits under the Old Age Security program. You can renew your benefits by filing the return by April 30. If you miss this deadline, you will have to complete a renewal form.
In Canada, personal income tax is levied on the worldwide income of individuals considered to be Canadian residents for the purposes of income tax, and also on certain types of Canadian-source income earned by non-resident individuals.
Canadian taxpayers must file their T1 Tax Return by the due date yearly. Every year the returns are due following the completion of the calendar year on April 30. If you are self-employed, or a spouse or common-law partner of a contractor, returns are due June 15. For all returns, amounts owing must be received by the CRA on or prior to April 30 to avoid being subjected to interest charges or penalties.
Individuals may determine the amounts owing by first determining their yearly taxable income. The CRA is entitled to collect the personal income tax through a variety of means, such as the following:
• Installment payments, which certain individuals are required to make every quarter throughout the year instead of paying at the end of April following the tax year.
• Deductions at source. This is where direct deductions from the pay of an individual are remitted to the CRA.
• Voluntary payments.
• Payments obtained by CRA Collections Officers.
3. Corporate Returns (T2) and Other Business Returns
While individuals file T1 income tax returns, corporations file corporate T2 returns. The type of business being operated will determine which return needs to be filed by the organization. Chapter 4 outlines the various types of business structures and their filing requirements.
4. Filing Deadlines
The following sections discuss the filing deadlines for the different types of returns. (For business income tax returns, see Chapter 4 for information about the various types of business returns and their deadlines.)
4.1 Individual income tax return
Individuals are required by subsection 150(1) of the Income Tax Act to file tax returns no later than April 30 for the previous year. This deadline is extended to June 15 for the previous year if the individual, or the individual’s spouse or common-law partner is self-employed or carries on a business. Although the deadline is fixed, exceptions to the rule do exist:
• When the due date is not a business day, such as a holiday or weekend, returns may be submitted by the next business day.
• Non-residents filing returns under section 217 must file by June 30 for the previous year.
• Self-employed individuals, their spouses, and common-law partners must file their returns by June 15 for the previous year. This does not change the April 30 due date for any GST or HST owing.
• Deceased individuals and their surviving spouse must have their returns filed. The date is extended to six months past the death of the individual, or by the regular filing, whichever comes later.
4.2 Partnership information return
Partnership information returns that follow a fiscal period that end December 31 are filed by March 31 for the majority of partnerships. An exception to this due date is if the March 31 filing deadline falls on a public holiday or a weekend, so long as it is postmarked by the next business day, or the filing and payment are received by the CRA by the next business day, it will be considered filed on time.
4.3 T4 and T4A information returns
The deadline for employers filing T4 and T4A information returns is the end of February for the previous year. This includes filing both a T4 statement of remuneration paid, and a T4A statement of pension, retirement, annuity, and other income. Similar to other filings, should the due date fall on a public holiday or weekend, the return is due the next business day.
4.4 T5 information return
T5 statements of investment income follow similar requirements to the T4 and T4A filings. The information return must be filed no later than the last day of February for the previous tax year. The deadline may depend on where one resides and whether the due date falls on a weekend or public holiday. This is because holidays vary depending on the province or territory in which one resides, which in turn alters the predictability of the due date. The rule of thumb in such a scenario is that the information return is due the following business day.
If the business activity ends or ceases to exist, a T5 must still be filed within 30 days.
5. Consequences of Not Filing
I would say that besides avoiding being a criminal in the traditional sense by not killing somebody or not stealing a car for example, filing one’s tax returns is probably the best way of avoiding obtaining a criminal record. It is so easy. File your returns and don’t get a criminal record for failure to file. Unfortunately, many Canadian taxpayers simply do not get this subtle point.
Many people are scared to file because they know that they cannot afford to pay the taxes so they risk a criminal record by not filing. What they fail to realize is that not paying their taxes is not illegal; they cannot get a criminal record or be imprisoned for it. However, not filing their taxes is illegal.
The many consequences associated with unfiled or late-filed tax returns are unfortunate, and are likely to occur in most instances of late filing. In the case of unfiled returns, if taxes are payable, many CRA employees will automatically assume that the taxpayer is evading the payment of taxes by not filing his or her returns. Sometimes the CRA is right, and other times a taxpayer has every intention of paying, but gets in trouble nonetheless.
Typically, when the CRA discovers that a taxpayer has failed to a file return, it will send a letter requesting that the taxpayer file any outstanding returns. If the return is not filed by the deadline, employees at the CRA can decide to either arbitrarily assess the taxpayer (a process in which the CRA makes a guess at the tax owing — usually it is much more than the actual tax owing), in which case the taxpayer must either object or file his or her return to correct inconsistencies,