Last week, the Canada Revenue Agency gave additional relief when it announced that penalties, including the late filing penalty (five percent of your balance owed, plus one percent of the balance owed for each full month of your late return, maximum 12 months), and late interest will not be charged as long as your T1 personal tax return is filed before September 1, 2020 and payment is made on that date.
The CRA also indicated that if you are required to file Form T1135 to report any foreign investment, including foreign stocks in a non-registered Canadian brokerage account, the total cost of which exceeds $ 100,000 at any time in 2019, no penalty will not be imposed provided the T1135 is also filed no later than September 1, 2020.
Announcement of penalty relief is good news for almost a quarter of Canadians who have not yet filed their 2019 tax return, although the vast majority of tax filers get a tax refund and are not subject penalties or interest for late filing. Tax return statistics for the 2020 tax return season (as of May 25) show that the CRA received approximately 22 million personal income tax returns for the 2019 tax year, out of a total forecasted to be approximately 28.4 million, the number of returns that were ultimately filed for the 2018 taxation year.
Of those who have filed to date, the majority (70%) of tax filers receive a tax refund, the average refund to date being $ 1,832. Only 18% of tax returns had a tax balance due for 2019 (average amount of $ 4,660), while 12% of tax filers had a zero balance.
“Last week was crazy,” said Lisa Gittens, senior tax professional at H&R Block Canada, who reports that this week’s volume “meets or exceeds what we see for a normal production deadline of April 30 “
But, is there a real rush to deposit before June 1 if there are no penalties as long as you deposit before September 1?
The answer may vary depending on whether you receive income-tested government benefits, such as the goods and services tax / harmonized sales tax (GST / HST) credit, the Canada Child Benefit, or the Guaranteed Income Supplement. . The next benefit year begins in July 2020 and the income from your 2019 tax return is used to determine how much you receive. Filing on time will help you minimize any impact on your benefit and credit payments, especially if your income has varied somewhat between 2018 and 2019.
The CRA has indicated that if it does not receive your 2019 return in time to assess it over the summer, it will use the information from your 2018 return to calculate benefit and credit payments until September 2020, which will ensure you continue to receive payments during the COVID-19 crisis.
The problem, however, is that you may not get the right amounts if your income varies from year to year. By filing as soon as possible, you may be able to avoid this problem.
If the CRA is still unable to assess your return in early September 2020, your estimated benefits and / or credits will cease in October 2020 and you will have to repay the estimated amounts that are issued to you as of July 2020.
As I explained in a previous column, under the Income Tax Act, quarterly installment payments are required for 2020 if your “net tax payable” this year will be more than $ 3,000 ($ 1,800 for tax filers in Quebec) and was also more than $ 3,000 in 2019 or 2018. The definition net tax owing is complex, but essentially refers to your net federal and provincial taxes, less income tax withheld at source, plus any CPP and EI premiums (if any) on income ” self-employment, as well as adjustments for certain other credits and reimbursements of social benefits.
If you received an installment reminder in February 2020, the June 15 payment due date has also been moved to September 1. The CRA has indicated that installment penalties and interest will not be charged for this as long as they are paid by this Date.
If you receive an installment reminder in August 2020, you may be able to reduce or not pay other installments for 2020 if the installments you already paid for 2020 will cover your estimated net tax payable for 2020 , or your net tax payable for 2020 will be $ 3,000 or less ($ 1,800 or less for residents of Quebec).
Last minute deposit tips
If you still haven’t made a complaint, here are some tips that can help you get the job done, while continuing to isolate yourself socially.
If you are a techie, there are dozens of tax preparation programs out there. A complete list of CRA certified software can be found online. Some software is completely free, while some of the paid packages offer free offers depending on tax situations or income levels. You can also access most of the 2019 tax slips remotely (T3, T4, T5, RRSP contribution slips, etc.) using the Automatically fill out my CRA return to download tax information in the software.
If you need help and are eligible, various community organizations across Canada have organized free virtual tax clinics where volunteers are available to prepare your taxes for free, by videoconference or telephone, through the Community Tax Program. Income Tax Volunteering (CVITP) and Tax Assistance – Volunteer Program in Quebec. These virtual clinics are tentatively organized to help complete tax returns while respecting physical distance guidelines. A list of clinics operating in your community is available online.
If you use a tax preparer or professional accountant to prepare and file your return, most have switched to a virtual contactless return. For example, H&R Block allows customers to take a photo of their tax slips with their phone and submit them online to a local tax preparation center. Alternatively, customers can file their tax documents during office hours and a representative will call them back to complete their tax return over the phone.
Jamie Golombek, CPA, CA, CFP, CLU, TEP is the Director General, Tax and Estate Planning, CIBC Private Wealth Management in Toronto.