By Ritika Dubey
The tax submitting deadline has come and gone, and a few Canadians are actually dealing with a major tax invoice.
The Canada Income Company is conscious individuals could also be struggling financially and may not have the means to pay that invoice, mentioned Charles Drouin, a spokesperson for the federal company. He urges those that discover themselves in that place to offer the CRA a name.
“Once you name the CRA, we’ll be delicate to that,” he mentioned in an interview. “We’ll attempt to perceive what your private scenario is and work with you.”
Establishing a cost association is on the prime of the listing. Individuals can name and set it up with an automatic teller or communicate to a consultant. It can be carried out on-line by means of CRA’s My Account.
The plan will doubtless contain dividing the funds into instalments over a time frame, reminiscent of 12 months.
Drouin mentioned every scenario is exclusive when establishing a cost plan.
When individuals suppose they may owe cash to the Canada Income Company, they like to not handle the scenario, mentioned Yannick Lemay, a tax skilled with H&R Block.
“That is utterly the alternative of the mindset it’s best to have towards your taxes,” he mentioned.
The deadline to file a private earnings tax return was April 30, whereas these self-employed have till June 17. The self-employed submitting deadline is normally June 15 however that falls on a weekend this yr.
“There’s an enormous ‘however’ right here,” mentioned Lemay. Despite the fact that self-employed individuals have till mid-June to file taxes, they nonetheless should pay any quantity they owe to the CRA earlier than April 30 to keep away from accruing curiosity.
The penalty for submitting your return late is 5 per cent of the 2023 steadiness owing, plus a further one per cent for every month the return is overdue.
In the event you’ve filed your return late in the last few years, the CRA will cost a ten% late-filing penalty and a further two per cent for every month the steadiness is overdue.
“As soon as you determine the quantity you owe to CRA, you don’t need to ignore any letters you’ll obtain from (them),” Lemay mentioned. “You’d need to be proactive about it.”
If funds aren’t made, the CRA can start tax assortment — contacting the employer and seizing paycheques and financial institution accounts, Lemay mentioned.
“You need to keep away from it in any respect prices,” he mentioned.
In the event you’re unable to pay, you might attempt requesting a waiver on penalties or curiosity, particularly if the circumstances are past the taxpayer’s management. However the CRA mentioned it’s selected a case-by-case foundation.
When a cost plan just isn’t arrange, the CRA can withhold credit and advantages, though some advantages, reminiscent of baby advantages, are untouchable on this case.
Ken Poniatowski, a licensed monetary planner at AMS Wealth Inc., mentioned many taxpayers are in a cash-flow crunch on account of inflation and an financial slowdown however says they need to search for different avenues to repay tax-related debt as early as attainable.
Tapping into one’s RRSP in the event that they’re in a low tax bracket can assist repay the quantity owing. However their earnings tax charge is essential to this answer or it might create an even bigger drawback for the taxpayer, Poniatowski mentioned.
“In its place, if somebody has entry to a line of credit score with low sufficient rates of interest, this can be thought of as a possible answer,” he mentioned.
He warned bank cards ought to solely be a final resort due to greater charges and curiosity.
But when somebody has no earnings to pay the tax steadiness owing, Drouin instructed reaching out to a debt administration centre and gauging their choices.
Over the previous few years, the gig economic system and facet hustles have made it simpler for some to hide their earnings as no T-slips are issued. However Drouin mentioned individuals nonetheless should report each greenback they make.
“You suppose you’re not going to get caught and (so) you’re not disclosing this info,” he mentioned. “Finally, you might be dealing with an audit.” He added that not submitting a return can escalate to authorized challenges too.
Jessica Morgan, founder and CEO of weblog web site Canadianbudget.ca, mentioned the perfect scenario for individuals in gig work or freelancing is to open a separate checking account to squirrel away cash for tax time.
“Put away 30% of what you make freelancing or no matter is closest to your marginal tax charge,” she mentioned.
Saving a portion in a separate account that an individual gained’t spend can save them from an enormous tax headache, Morgan mentioned.
“Within the case that you simply’ve over-saved, you might have a pleasant bonus to maintain for your self.”
This report by The Canadian Press was first revealed Might 1, 2024.
