Why you should file your taxes ASAP in Canada [2024]

Tax time is upon us. Did your stomach just drop? You’re not alone — a recent survey from tax accounting software Turbo Tax found that 85% of young Canadians feel anxious about filing their taxes this year. But our licensed insolvency trustees have heard this sentiment from our diverse client roster, which includes Canadians in their 40s, 50s, and even seniors. Still, tax filing is a necessary evil because it saves you money in the long run. Sure, you still need to pay your taxes; but filing on time will save you additional interest fees and late penalties. Plus, it helps you take advantage of your tax refund and certain benefits. We’ll walk you through why you should file taxes in more detail below.

When to file your taxes in Canada

Canada’s tax filing and payment deadlines fall on the same dates. For many Canadians, that date is April 30, 2024. But if you or your spouse/common-law partner are self-employed? Your tax filing due date is June 15, 2024.

Why you should file your taxes on time: 4 reasons

We know tax filing can feel overwhelming, so it’s easy to put it off. But before you procrastinate, consider these reasons why you should file ASAP:

1. Enjoy your tax refund

Imagine your day with an extra $2,196 in your pocket. You can make a substantial credit card payment, invest in your children’s education, or even indulge in a vacation. That’s the Canadian average tax refund amount for 2023 taxes. But here’s the thing: you won’t see that until you file your taxes!

2. Avoid late penalties

Late to file? The CRA might be late responding to your phone call, but they won’t hesitate to shell out an interest bill and late penalties. Here’s what late payments will cost you:

• 5% on your balance owed
• An additional 1% for every full month you file late (maximum 12 months)

Now, what if you’re late by more than a year? You’ll have to pay even more:

• 10% of your balance owed
• An additional 2% for each full month you filed late (maximum 20 months)

We get it; at first glance, these numbers don’t look that big. What’s the harm of filing late? Let’s break it down. Say you’re in the middle-class in Toronto, and make about $100,000 a year. After all your deductions, you owe the CRA about $20,000. If you wait a year to file, here’s what your late penalties look like:

• 5% of 20,000 = $1,000
• + 1% of 20,000 (11 months) = $2,100

Your procrastination just cost you an extra $3,100 on top of your tax obligation — money that could have gone toward paying off debt, rent, groceries; you name it. But things happen. Maybe you were laid off, or had unexpected expenses from a health issue. The good news is that the CRA considers circumstances like these. We recommend you reach out to the CRA and request they waive your penalties. Just keep in mind they only consider this for filings within 10 years of your request.

3. Save on interest fees

Late penalties all paid? Phew — but the CRA isn’t done yet. Interest is another financial obligation you’re responsible for if you file late. You’ll have to pay a compound interest of 10% starting May 1st, 2024 — only one day after the due date. If you’re only a couple of days late, that interest is minuscule. But if you wait a whole other year? Those 365 days can seriously add up. For your reference, the prescribed interest rate for 2024’s first quarter is 10% on overdue taxes.

4. Enjoy extra income from government credits

Wouldn’t you like to add a little extra coin to that tax refund? You can if you file your taxes and enjoy monthly and quarterly government tax credits you’re eligible for. Here are a couple of examples of both federal and provincial tax credits:

• Canada Carbon Rebate (formerly the Climate Action Incentive Payment): Quarterly tax credit to offset pollution reduction costs like the Carbon Tax. For example, single Canadians who live in urban areas are eligible for at least $140 quarterly.
• Ontario Trillium Benefit: Combines various tax and energy credits for Ontarians to offset property tax and energy costs. This annual credit amount varies, from up to $1,421 for seniors, or $1,248 for most adults.

Most accountants will check your eligibility for tax credits before you file, but don’t feel nervous to double-check that they’ve checked for all of them. Additionally, visit the Government of Canada’s tax credit page for more information.

Deal with tax debt with Remolino & Associates

Our staff of debt administrators here at Remolino & Associates, Licensed Insolvency Trustee, have seen it all when it comes to Canadian debt. Our clients come from many different backgrounds, from business owners behind on tax debt to lower-income seniors struggling to budget their pension payments. The case for why you should file your taxes is clear. Late penalties and compounding interest make it easy for tax debt to spiral out of control. Let’s stop the spiral, together. Step one? Book a consultation with one of our licensed insolvency trustees. We’ll help you understand your full debt situation and walk through debt relief options available to you. Tackle tax debt today with Remoline & Associates.