With less than a week to go to the April 30 deadline, 45% of Canadian tax filers have yet to submit their returns – potentially putting some at risk of paying late penalties and interest charges, says Jamie Golombek, CIBC’s managing director of tax and estate planning.
According to the Canada Revenue Agency, as of April 23, 14.3 million Canadians had submitted a return. That’s about 55% of the 25.7 million returns that were filed in Canada in 2009, a close proxy for the number of returns anticipated to be filed for 2011.
“If you don’t file your return on time, penalties can add up quickly,” says Golombek. “CRA imposes a penalty of 5% of the amount owing for 2011 plus 1% of the outstanding balance for each full month that your return is late, to a maximum of 12 months.”
He notes that if you were subject to a late-filing penalty for any of the previous three years (2008, 2009 or 2010), your 2011 penalty could more than double. Repeat offenders face penalties of 10% of the amount owing for 2011 plus 2% of the outstanding balance for each full month that the return is late, to a maximum of 20 months.
Self-employed individuals – and their spouse or partner – have until June 15 to file, but any balance owing is due April 30.
Many of the 14.3 million Canadians that have already filed are getting a refund. So far, the CRA has issued refunds of $14.8 billion, with the average refund being about $1,500 per person, compared to just $5.2 billion reported as taxes owing to the government.
“Typically Canadians who expect a refund are among the first to file a tax return so they can get their money back as early as possible,” says Golombek. “While many early refund recipients may feel proud of their fiscal management, remember that getting a refund is just a sign of poor tax planning. It means that you have loaned your hard-earned money to the government, interest-free, for up to 16 months.”
Canadians are increasingly filing their taxes electronically. According to the CRA, as of April 23, 74% of taxpayers had filed their 2011 returns electronically; compared to 24% who had submitted their return by mail, courier, or personal delivery.