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Procrastination Doesn't Pay at Tax Time

If you don't owe, you may not feel any pressure to file but getting your tax return completed on time makes good financial sense. If you miss your tax filing deadline, you are immediately hit with a five per cent penalty on whatever you owe. It may be easy to put it off and file later, but you should remember that a tax refund is your money.
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If you don't owe, you may not feel any pressure to file but getting your tax return completed on time makes good financial sense.

Unless you or your spouse are self-employed, your personal tax return is due on April 30 at midnight. As long as you don't owe, you may not be concerned. Based on early April filing numbers, Canadians seem to be taking full advantage of the "not necessarily needing to file by the deadline" deadline. While it may be easy to put it off and file later, you should remember that a tax refund is your money.

The process is supposed to go something like this: You file your tax return; the CRA processes it and issues a tax assessment, stating what you've paid, what you should have paid, and what you are owed (or owe). During the summer and into the fall, the CRA matches every slip they have that is related to your return in order to confirm the assessment, or issue a new one. They may also request receipts to support certain credits or deductions you have claimed.

In a recent Leger survey, 78 per cent of Canadians said they weren't worried at all about being reassessed or audited by the CRA. The CRA performs more than 370,000 audits and reviews in any given year. While some are random, many are targeted. Moving expenses, childcare expenses and larger than usual medical expenses can all trigger a request for more information. As long as you can provide the paperwork, it is a routine request. But simply not filing a return raises your chances of being assessed or investigated down the line.

You must file a tax return if you owe the CRA money, if you want to claim benefits like GST/HST refunds or childcare amounts or if the CRA requests a return from you. If the CRA demands you file your tax return, you will have 30 days to comply. If you don't file within the timeframe, the CRA may file a return based on the information that they have and you may find yourself with a tax bill. You can try to ignore your taxes but they will eventually catch up.

If you don't owe the CRA money, technically, you don't have to file a return. Some people actually bank their unfiled returns almost as a rainy-day fund; when they need it, they'll file. The problem with this tactic is that the government has your money, and it's paying minimal interest on it. Unfiled tax returns are not really a sensible money-saving strategy.

Some people don't file their tax returns for the opposite reason: They don't have the money to pay what they owe. This is absolutely a financial disaster waiting to happen.

If you miss your tax filing deadline, you are immediately hit with a five per cent penalty on whatever you owe. That $1,000 you owe overnight became $1,050. So even if you owe, file your tax return on time and you avoid the penalties. Beyond that, each additional month you fail to file garners you one per cent interest on your outstanding balance up to a maximum of 12 months.

With an April 30 deadline, you're already pushing the envelope. If you're using NETFILE to file your return, it will be busier as the deadline approaches. Wait until the last minute and you might find an overloaded system that can't take your return in a timely fashion. Waiting until the last day to file with a third-party preparer will mean you are in for a wait.

And if you've ignored all this advice and find yourself at the eleventh hour, then make sure you have all your paperwork and slips so you don't miss claiming a deduction or credit. Trying to track down a T4 on April 30 will be challenging. Your tax return is an important financial document that you should complete every year.

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