Tax-filing countdown

09-24-2020
Tax-filing countdown

Missing the Sept. 30 deadline means penalties

 

The extended Sept. 30 filing deadline hasn’t arrived yet. But, according to the most recent processing statistics from the Canada Revenue Agency, there are still 2019 returns outstanding. And, with this unusual tax season soon to be behind us, its vitally important for individuals to consult with their advisors now to manage tax debts, maximize remaining social benefit payments, and plan to reduce taxes payable in 2020. It’s a tall order.

First, to this year’s tax filing statistics. According to the CRA, over 29.4 million 2019 tax returns were filed by Sept. 8, compared with over 30.3 million 2018 returns filed last year. The average refund on just over 19 million returns was $1,846, while some 6 million returns had balances due averaging $6,133. Those amounts must be paid by Sept. 30 to avoid interest costs, at a compounding rate of 5% expected for the last quarter of this year (the prescribed interest rate plus 4 percentage points).

Here are some action items to add to year-end conversations with your advisor:

Non-filers will lose more: Aside from the late-filing penalties and interest, non-filers after Sept. 30 will lose access to the refundable and social benefits they may qualify for as low- and middle-income earners. That is, these tax-free income sources will suddenly stop. Many families will not understand why. Tax and financial advisors should be proactive in communicating this to their clients.

Worse, in fact, in some cases, families may be required to repay Canada Child Benefits or GST/HST credits, if 2019 net family income was higher than the 2018 income that the extended benefits paid from July to September was based on.

In addition, non-filers will miss out on the opportunity to increase their social benefits and credits, should family net income have dropped in 2019. They will not have logged their 2019 RRSP contribution room, and they may have missed out on logging valuable carryover balances – capital and non-capital losses.

And, with only three months left in 2020, there are tax efficient investments to make: RRSP top-ups to reduce 2020 net income levels, for example. This is critical to those age-eligible taxpayers with RRSP room who wish to keep all or most of their CERB and new Canada Recovery Benefits, their EI benefits, and their OAS payments, and maximize both refundable and non-refundable tax credits.

If you find yourself in this situation, and haven’t already done so, consult with your DFA Tax Services Specialist™ before the end of this month.

© 2020 The Knowledge Bureau, Inc. All rights reserved. Used with permission.

Evelyn Jacks is an award-winning financial educator, best-selling author, tax expert, and founder of Knowledge Bureau™, a widely respected financial education institute and publisher which has welcomed thousands of students from the various financial services to its online and in-class programs. Follow Evelyn Jacks on Twitter @EvelynJacks. Visit her blog at www.evelynjacks.com. Beth Graddon is Marketing and Communications Manager at Knowledge Bureau.

Notes and Disclaimer

The foregoing is for general information purposes only and is the opinion of the writer. No guarantee of investment performance is made or implied. It is not intended to provide specific personalized advice including, without limitation, investment, financial, legal, accounting or tax advice.

The financial fallout of the Pandemic will manifest itself in several ways this fall: tax auditing for individuals receiving the CERB and EI payments, estimated Canada Child Benefits, OAS and other government benefits, tax audits for businesses receiving wage subsidies and GST/HST tax filing relief as well as personal and business bankruptcy. As important, financial distress relating to family health care is at the forefront of planning. Tax, bookkeeping and financial professionals who want to help clients weather these financial storms need to come up to speed on these issues. To learn more, attend the Virtual CE Summit on September 30.