What Happens If You Fail to File Your Taxes on Time in Canada - What to Know

Out of all the experiences that you could go through as a Canadian business owner, tax season as a whole can almost always prove to be a huge source of stress. Even so, it should go without saying that it is far better to rack your brain with preparing your reports than not filing them at all. Aside from the fact that it is your obligation as a business owner, there are several other reasons you should file your taxes on time. Otherwise, do you know what happens if you file your taxes late in Canada?Not filing your taxes on time, to put it simply, puts you at risk of incurring penalties depending on various factors, such as the amount due and the nature of your business. Whether you’re required to file your taxes and submit them by April 30th or June 15th every year, late tax filing will render you subject to the following penalties: 

Penalty #1: Failure to file on time

As one of the most common tax-related violations committed in Canada each year, a failure to file taxes on time can lead to a costly penalty that adds up the longer you wait before submission. You will face a penalty of five percent of the total amount that you owe and an extra one percent fee for each month that you haven’t paid for your taxes yet. The maximum amount of the added percentage is set at 12 months. In addition, you will also be charged a compound daily interest for any leftover taxes if you aren’t determined as a tax evasion culprit.

Penalty #2: Tax evasion and fraud 

Generally speaking, the Canada Revenue Agency hands out leniency to those who failed to file their taxes on time or made a few minor errors out of confusion to a certain extent. If the CRA determines that you are actively trying to evade paying your taxes or are guilty of committing tax fraud, however, then the situation may change greatly in terms of the penalty that will be assessed. A case of tax evasion or tax fraud is determined by the CRA in one of two different ways, namely: 

Should the CRA come to the conclusion that you have committed one or both of these violations, then you will be subject to a strict set of consequences for tax evasion or fraud. The standard penalties for tax evasion or fraud include prison sentences that vary in length and a fine of up to 200 percent of the total amount that you were trying to avoid paying. 

Penalty #3: Voluntary disclosure

A case of voluntary disclosure often occurs when a business owner makes a mistake when filing their taxes, especially when it’s their first time to do so, and they haven’t hired a professional to help them out. The CRA has taken extra steps to remedy the all-too-common problem of new business owners overlooking their taxes and forgetting to pay by creating the voluntary disclosure program. While it may not necessarily act as an exemption card that avoids all possible consequences of tax violations, the voluntary disclosure program makes it far easier to avoid severe repercussions.The Canadian Revenue Agency is fairly strict when it comes to conducting audits and upholding the rules on tax filing. That said, not paying in time comes with dire consequences, which is why you have to be familiar with them so that your bank account will not suffer.

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