Income Tax Deadlines Have Been Extended
As part of Canada’s COVID-19 Economic Response Plan, the Canadian government has extended the deadline for filing individual tax returns to June 1, 2020. Taxpayers will have until September 1, 2020, to pay any 2019 income tax amounts owed to avoid getting charged interest.
The deadline, if you or your spouse or common-law partner carried on a business in 2019 (other than a business whose expenditures are primarily in connection with a tax shelter), is June 15. However, if you have a balance owing for 2019, you have to pay it on or before September 1, 2020.
To receive your refund in a timely manner you should file your return on or before the deadline and sign up for direct deposit. If you are not comfortable giving your bank account info to CRA then you can choose to receive your refund by check, however, this may take longer.
If you have an amount owing and cannot pay it in full by the deadline, you will be charged compound daily interest. Generally, you can make arrangements for monthly payments as long as the debt is paid before the next income tax deadline. Contrary to popular belief, the interest you pay CAN NOT be claimed as a deduction on the following year’s income tax return.
What happens if you're late?
If you owe tax for 2019 and you file your return for 2019 after the due date, you we will be charged a late-filing penalty. The penalty is 5% of your 2019 balance owing, plus 1% of your balance owing for each full month your return is late, to a maximum of 12 months.
If you were charged a late-filing penalty on your return for 2016, 2017, or 2018 your late-filing penalty for 2019 could be 10% of your 2019 balance owing, plus 2% of your 2019 balance owing for each full month your return is late, to a maximum of 20 months.
A large income tax debt is one of the first signs of financial hardship to come and shouldn't be ignored. Putting it on your calendar and getting filed and paid on time will save a lot of stress and could prevent bigger problems down the road.