Take Control Over Taxes
The 2020 income tax season is upon us. Are you ready?
You may have noticed tax kiosks starting to pop up in previously vacant places. With the 2020 income tax season upon us, now is the time when you should be preparing for your tax return. Unfortunately, unattended income tax debt is a serious financial problem for many Canadians. Here are our tips to help you file your taxes on time and stay in control of any income tax you may owe.
Plan for the Deadlines
We’re all guilty of procrastinating on things we don’t want to do but don’t let filing taxes be one of them. Less than 20% of Canadians file their returns well in advance, opting to leave them to the last week or two before the deadline. Filing your income tax so close to the deadline can be financially risky, as you could find yourself owing more money than you planned.
The deadline for filing your 2019 tax return is April 30, 2020. If you or your spouse is self-employed, you have until June 15th to file taxes; however, any amount owing is still due by April 30.
We recommend you give yourself enough time to prepare your return by starting early. If you plan on having your taxes done by an accountant, schedule an appointment date that’s at least three weeks away from the April 30 deadline. If you happen to be missing any of the necessary paperwork for your tax filing, you will have more time to track down what you need without running out of time. Outstanding tax information can be easily dropped off at your accountant’s office for them to include in your tax return.
Filing your taxes on time will keep you from having to pay a late-filing penalty. If you owe tax and miss the deadline for filing your return, the Canadian Revenue Agency (CRA) will charge you a 5% penalty on the amount you owe. You’ll also be charged an additional 1% for every additional month your return is late for a maximum of 12 months.
If you were charged a late-filing penalty for your returns in 2016, 2017, or 2018, the late-filing penalty increases to 10% of the amount owing, for a maximum of 20 months. Even if you have an amount owing on your taxes, you should still file your taxes on time to avoid having to pay the additional costs associated with the penalty.
Find an Accountant
While some people successfully file their own taxes using tax preparation software, not everyone feels so inclined. Don’t let this be the reason why you avoid filing your income tax return. Many Ontarians use professional accountants when filing their taxes. Professional tax experts know the ins and outs of the Canadian tax systems and will find you tax write-offs that can help reduce the amount you may owe. These deductions can change from year to year and you may miss them if you haven’t done the research yourself.
Hiring a tax professional is a wise choice if your financial situation is more complicated. If you run your own business or work as a freelancer, you could benefit from hiring an accountant who will make sure you file all your income and expenses correctly. Other situations, such as paying alimony or child support, can also add complexities when filing a return. When in doubt, don’t be afraid to seek professional assistance to help you with filing your taxes.
CRA Payment Arrangements
If you owe tax debt, you may qualify for a payment arrangement with the CRA. This arrangement can help you to make smaller payments over a period of time until you have paid your debt in full. To be eligible for a payment arrangement, you have to show proof that you’ve been unsuccessful in paying your debt through other means, such as taking out a loan or lowering your expenses. The CRA’s Payment Arrangement Calculator will determine how long it will take you to pay off your debt and can calculate how much your payments will be if you want to pay off your balance within a specific time period.
With a little preparation and planning, you can take control of your taxes in 2020!
If your tax debt has ballooned out of control, let us help. Let’s have a conversation about your debt solution options and how you can get organized with filing your taxes going forward. Contact us to meet with one of our Licensed Insolvency Trustees today.