The perils of filing tax returns late

This year, more than just penalties at stake

In the fray of the pandemic, tax-filing deadlines have come and gone, with the most recent being the June 1 personal tax filing deadline. Governments have been committed to keeping tax benefits flowing based on the 2018 return and will even waive late-filing penalties and interest for failure to file. But a big reckoning is coming at midnight on September 1.

Recipients of benefits like the Canada Child Benefit and the GST/HST Credit, OAS, and GIS who failed to file their tax returns in June are particularly affected. The benefit year for those amounts starts on July 1, based on the 2019 tax year. But if you fail to file this month, those benefits will be based on the 2018 income reported by the family and are considered to be “estimated benefits.”

Be clear: You must still file a 2019 tax return by September 1. But if the government cannot assess your return by early September 2020, you will be required to repay the estimated benefit amounts you got starting in July. Worse still, your benefits will stop entirely in October.

Bear in mind that not only will tax returns and remittances be due on September 1, but so will the June 15, 2020, quarterly remittance. Two weeks after that, on September 15, another quarterly remittance is due. Penalties and interest will add up fast for those who cannot pay or repay. If you’re in this situation, expect to receive lots of communications and assessment notices from CRA by the end of September.

But it gets worse: In provinces where property taxes and other provincial payments were postponed, the fall will attract even more of a cash crunch.

The money moral

The message to procrastinators is this: File your tax returns before the summer and start saving for an expensive fall. The traditional “back-to-school” time also means back-to-tax time. As important, start planning to reduce your 2020 taxes, which will be due a short 11 months from now!

P.S. Your tax advisor will also likely be in a better position to help (and quite possibly in a better mood) now than when you show up with your shoebox on August 29. Consult a DFA-Tax Services Specialist™ for expertise on the current tax situation and for help in filing your returns on time.

Check Knowledge Bureau for updates and breaking news on federal tax and income support changes.

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.

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.