The art of tax-filing deadlines

April 30 is just one deadline

So you think the tax-filing deadline is April 30? Seems straightforward enough. But remember, we’re talking taxes here, so nothing is ever straightforward! Sure, the general rule is that if you are an employee, your tax return will be due April 30, 2019, for your 2018 tax year. But if you are self-employed, or even if you simply carry on a business in addition to being an employee, your tax return won’t be due until June 15, 2019. And that’s the just beginning. Read on for more about the intricacies of tax-filing deadlines.

If you have a business…

Notwithstanding the general April 30 deadline, if you carried on a business in the taxation year (subject to certain restrictions relating to the type of business carried on), you are given until June 15 of the following year to file a return. This later deadline is also extended to your spouse (including a common law spouse or partner, all of whom I’ll refer to as “spouse” for the sake of simplicity).

However, if you and your spouse have been living separately for at least 90 days as of Dec. 31, 2018, by reason of a marriage breakdown, your spouse won’t get the benefit of the extended June 15 filing deadline and must file by April 30 (which may not make you lose too much sleep, granted). Of course, if both you and your spouse carried on a business in the taxation year, you are each granted the June 15 deadline regardless of whether you are living together.

So why the extension? It relates to the fact that all individuals carrying on business are required to have a Dec. 31 year-end (or to pay tax as though they did). Corporations that have a year-end of Dec. 31 have until June 30 to file their tax return. So it only seems fair that if you are carrying on a business as an individual, you should get similar (if not exactly the same) treatment.

Of course, there are a couple of catches to be aware of. Even though you can file up to June l5, the CRA is not so generous as to let you off the hook from paying your taxes until then. April 30 will still be your “balance due date,” meaning you have to actually cough up the money for any taxes owing on April 30, otherwise you will be charged with interest on unpaid taxes. It’s not insignificant either – the current rate is 6%, compounded daily.

Even so, this deadline may be very helpful if you miss the April 30 filing deadline and you owe taxes.

The penalties

If you don’t file your return on time (either by April 30 or June 15 if you qualify for the extended deadline), you will be subject to a penalty. The penalty is 5% of the tax unpaid when the return should have been filed, plus 1% of the tax outstanding at the time of the filing deadline, times the number of complete months (not exceeding 12) between the actual filing deadline and when you filed the return. In short, the maximum penalty is a whopping 17% per cent of the tax unpaid!

The penalty can be applied even if you file the return only two days late. This penalty is added to your assessment, and if you want to object, you have to actually file a Notice of Objection to the assessment. Note: If you have a habit of filing late, be aware that if you were charged this penalty for your previous three tax returns, the penalties are doubled for the 2018 tax year (10% of the tax owing plus 2% for each month outstanding).

Of course, if you are late filing due to circumstances beyond your control (e.g., you are hospitalized due to a serious illness), you can apply for leniency by making an application under the taxpayer relief provisions to have the penalties and interest reduced. The request should be made in writing and addressed to your Tax Services Office. Note: Even if you cannot pay your full balance owing for taxes by April 30, by at least filing your tax return, you can avoid this late filing penalty. So, don’t hold off on filing your tax return just because you are not able to pay the taxes owing for the year.

If you find yourself unable to file by April 30, it may be particularly important to determine whether you qualify for the June 15 extension. It applies if you are a “consultant” – i.e., rather than being an employee for tax purposes, you are classified as an “independent contractor.” The June 15 deadline will also apply if you carry on business through a partnership – even if you are a limited partner.

Delayed filing for some investments

Since many investments are structured as limited partnerships, this seems to open up the possibility that investors in these vehicles might be able to file on June 15. In fact, the rules seem to say that if you met the prerequisites at any time during the year, you’re eligible for the extension. But if you invested in a tax shelter investment, you will not be eligible for the June 15 deadline. More specifically, if the expenditures made in the course of carrying on the business are primarily the cost or capital cost of tax shelter investments, or primarily tax shelter investments itself, you won’t qualify for the extended deadline. For this purpose, tax shelter investments are certain limited partnership interests (basically where expected writeoffs within four years of acquisition equal or exceed the cost of your investment, net of prescribed benefits), or are registered tax shelters as defined in the Income Tax Act.

There are lot of ifs, ands, or buts in this, and it can get complicated. So, it may be prudent not to claim the extension unless you’re in a jam. However, if you have been assessed late filing penalties, these arguments may come in handy.

And if your spouse does take advantage of filing by the June l5 deadline, you should be aware that this extension is not a family-wide benefit. If you have any children who file returns, those returns must still be filed by April 30. The extension for your spouse (if you are carrying on business) is granted mainly to facilitate compliance with the Child Tax Benefit provisions which requires filings by both spouses. Accordingly, the issue of whether you and your spouse are living together is determined under the Child Tax Benefit rules. Happily, the extension applies regardless of whether your spouse actually receives the Child Tax Benefit; for example, it applies even if you and your spouse have no children.

If you are not carrying on a business and cannot take advantage of the extended June 15 deadline, you’re going to have to bite the bullet and file by April 30. This can sometimes result in a rushed filing and occasionally a mistake or two on your return. This error or omission can also result in either an increase or decrease to the tax payable to the government. However, the CRA prefers that you do not file an amended income tax return in these circumstances. Instead, you should write to the Tax Centre where you filed your return with an explanation and any additional material, such as T4 slips, T5 slips, and receipts. It is likely that CRA will also prefer that you include Form TI-ADJ to organize the presentation of your adjustment request in a convenient fashion. Correspondence with the CRA should include your Social Insurance Number or Identification Number.

Samantha Prasad, LL.B., is a Partner with Toronto law firm Minden Gross LLP, a Meritas Law Firm Worldwide affiliate, and specializes in corporate, estate, and international tax planning. She writes frequently on tax issues, and is the co-author of Tax and Family Business Succession Planning, 3^rd Edition. She is also co-editor of various Wolters Kluwer Ltd. tax publications. Portions of this article first appeared in The TaxLetter, © 2018 by MPL Communications Ltd. Used with permission.

Disclaimer

The foregoing is for general information purposes only and is the opinion of the writer. This information is not intended to provide specific personalized advice including, without limitation, investment, financial, legal, accounting or tax advice.