Keep Your Tax Refund: Use Your Post-Tax Season Checklist
So, you have made it past another April 30, which means your family tax returns have all been filed on time, refunds are well invested and documents are stored away in an easily retrievable place in case of audit later this summer. Not the case? If you, like many others, are a little disorganized, take heart and note of the following seven post-tax season tax tips. Then get cracking with your saved money-tax savings are yours for the taking if you act now:
- It's June 15 for Some. If you operate an unincorporated small business, good news: your tax filing deadline is June 15. However, if you owe money, know that your interest clock started ticking on May 1; so file as quickly as possible to minimize those costs.
- Late Filers. If you owe money to CRA you will have incurred a late filing penalty of 5% of any outstanding taxes plus a further fee of 1% per month for 12 months, plus interest. Filing now will help minimize these costs. If the government owes you, there is no penalty for late filing, but you'll finally get to use your money, which has been on loan to Ottawa on an interest-free basis.
- Chronic Late Filers. It always surprises me how many people are many years behind in filing their tax returns. Do so now to access refunds, tax credits and create RRSP and TFSA contribution room. Penalties can be prohibitive if you owe CRA, however. The late filing penalty increases to 10% of outstanding amounts plus 2% per month for 20 months, if you have late filed twice in the last three years, plus interest, of course. You might also be subject to a gross negligence penalty of 50% of the unpaid taxes, if CRA contacts you before you contact them. (Ouch!)
- Make Arrangements to Pay. Many people don't file because they just can't pay their tax balances. This is costly as explained above. File anyway, avoid penalties and arrange to make payments over time.
- Found an Error or Omission? Then adjust your prior filed return-never file another return for the same tax year. You can request adjustments for up to 10 years back. This can be lucrative for some people.
- Hardship is Considered. Sometimes, late filing happens due to hardship: death or illness in the family for example. In those cases use the Taxpayer Relief Provisions to ask for interest and penalties to be removed from your file.
- Get Ready for A Visit from the Auditor. This can happen to just about anyone, so it is always best to file and "audit proof" return. If you are being asked for the receipts to justify your claim for items like the Disability Amount or Home Renovation Tax Credit, your business, charitable expense claims, be sure to answer promptly and with all the required information. You might want to ask for an extension to comply fully, but if there is a lot of money involved, do consider engaging professional help.
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