Late filing penalties
Late in current year: 5% of the tax-years balance owing + 1%/month of balance owing to a maximum of 12 months.
Late for the second time: 10% of the tax-years balance owing + 2%/month of the tax-years balance owing to a maximum of 20 months.
· Keep copies of your tax returns for at least 6 years or longer. Most people don't need to worry about tax fraud investigations and unreported income but you should keep a copy of your return, particularly if you enlist the help of a tax professional. Your previous tax returns will help you to see trends in your income taxes to better prepare for your future tax returns. If you switch tax preparers it is beneficial for them to review previous years to determine whether any credits or deductions that where missed or need to be carried forward from previous years.
· If you do not have any income you still need to file your taxes. This lets CRA know your income situation and that you are up to date. Failure to file a tax return will result in termination of various benefits such as Child Tax Benefit, HST benefit, Universal Child Care Benefits and the Working Income Tax benefit.
· If you don't have the funds to pay your tax liability at the moment, CRA still encourages everyone to file their return. Once the return has been assessed a payment arrangement can be made with CRA. While you will still be charged interest, you will have successfully avoided late-filing penalties.
· Know the difference between an RRSP and TFSA. Each has benefits that will affect you differently based on your current income and retirement income.
· When you make an RRSP contribution you get to deduct that amount from your taxable income. The investments inside your RRSP grow free of tax while they stay in the plan. Down the road, however, when money is withdrawn directly from the RRSP or from the registered retirement income fund (RRIF) or annuity to which the RRSP has been converted, it will be taxable.
· TFSA is the mirror image of an RRSP. You contribute after-tax dollars. In other words, you don’t get a deduction for your contribution in the current year. But once the money is in the plan, it not only grows free of tax, but also comes out free of tax.
· You are going to have to file your taxes either way, why not have them professionally done in the comfort of your own home?