Taxes and procrastination are a natural combination. There is always something more interesting to do than your tax return. And tax procrastinators received a boost from the Heartbleed Bug, which shut down the Canada Revenue Agency's electronic filing system for five days and resulted in a new deadline: May 5, also referred to as April 35, that allows you to file without penalties and interest.
Even though electronic filing is supposed to make tax filing easier, we still seem to be a nation of procrastinators. When you look at last year's filing numbers from the CRA, almost one in four taxpayers waited until the last week to file. This year we are on track to have about one third wait until the last minute. No wonder NETFILE is really slow on deadline day.
It may be tempting to take the five extra days, but filing by the original April 30 deadline does have a number of advantages. First, you get your tax return completed and out of the way, so you can enjoy the nicer weather. Second, you can get your money back from the government sooner, because they do not pay interest -- unlike when you owe them. According to the CRA, the average tax refund is more than $1,500; that is a lot of money to let someone else hang onto for you.
There are other practical reasons to file early. If you receive Canada Child Tax Benefit (CCTB), Old Age Security (OAS) and GST/HST benefits, you need to file on time to continue to receive these uninterrupted. The same applies to provincial benefits. The amount you receive is based on your current tax return; fail to file the return or file too late, and your government payments will stop coming. You will receive payments retroactively once you get caught up on your tax return, but it is easier just to file on time the first time.
If you insist on waiting until the last minute, take the time to find all your receipts and slips to make sure you do not miss claiming a credit or deduction. Every slip of paper could mean you pay a little less tax, so each one is valuable. But if you find slips after you have filed, you can either use My Account or a T1 Adjustment Request to amend your return.
Hang onto your paperwork even if you file electronically. The CRA conducts random reviews of tax returns during the summer months, and they can ask to produce a slip or receipt. If you cannot produce proof of your claim, the credit will be denied and your return will be reassessed.
For multi-year procrastinators, there is no time like the present to catch up on your returns. The CRA can send you a letter demanding you file your returns within a certain timeframe. Or it can do an assessment based on previous tax returns, and you may be facing a bill. So take the time to find your old slips and file all your outstanding returns.
If you do owe, the extra five days means you can hang onto your money for a little longer. Also, it means people with tax money stashed in a savings account can collect April interest before making the withdrawal for the taxman. It may not seem like much but it could provide a little comfort after writing your cheque.
Make sure your return is filed by May 5, or you will be facing penalties and interest starting from May 1. The CRA may have added some extra days but, when it comes to calculating interest and penalties, it is sticking with the original timetable.
No matter what your tax filing habits are, you should file a return every year. It is an important document in your financial plan and allows you to access benefits and credits you are entitled to claim. Even with little to no income, you should file a return. Canadians often complain about the amount of tax they pay, but your tax return allows you to make sure you aren't handing over more than is absolutely necessary.
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