How Much Interest will I need to pay in case of late filing?

  • If you have a balance owing for the year, you are charged compound daily interest starting May 1 on any unpaid amounts owing. This includes any balance owing if your return is reassessed. In addition, you will be charged interest on the penalties starting the day after your return is due.
  • The rate of interest you are charged can change every three months. If you have amounts owing from previous years, they will continue to charge compound daily interest on those amounts. Payments you make are first applied to amounts owing from previous years.

How much is the late filing penalty?

  • If you owe tax and do not file your return on time, you will be charged a late-filing penalty. The penalty is 5% of your current tax year balance owing, plus 1% of your balance owing for each full month that your return is late, to a maximum of 12 months.
  • If you were charged a late-filing penalty on your return for any of the previous three years your late-filing penalty for this year may be 10% of your current tax year balance owing, plus 2% of your current year balance owing for each full month that your return is late, to a maximum of 20 months.

Who need to file their tax return?

Who has to file income taxes?

  • You have a balance owing on your tax return.
  • You received a request to file a return.
  • You and your spouse or common-law partner elected to split pension income.
  • You sold property or realized a taxable capital tax gain.
  • You are required to repay Old Age Security (OAS) or Employment Insurance (EI).
  • You have not repaid all of the amounts you withdrew from your Registered Savings Plan (RRSP) for a Home Buyers Plan or Lifelong Learning Plan.
  • You have to contribute to the Canada Pension Plan (CPP).
  • You are currently receiving Working Income Tax Benefit (WITB) advance payments and would like to continue receiving these benefits.
  • You still may want to file if any of the following apply.
  • You want to receive a refund.
  • You want to apply for the Goods and Services Tax/Harmonized Sales Tax (GST/HST) credit.
  • You or your spouse or common-law partner want to begin or continue receiving Canada Child Tax Benefit.
  • You have incurred a non-capital loss and you want to be able to apply in other years.
  • You want to carry forward or transfer the unused part of your tuition, education or textbook amounts.
  • You want to report income for that you could contribute to your Registered Retirement Savings Plan (RRSP) so that you can keep your RRSP deduction limit for future years.
  • You want to carry forward the unused investment tax credit.
  • You are applying for the Ontario Energy and Property Tax Credit.

How to file your Tax return?

You may file your tax return with the Canada Revenue Agency (CRA) by Internet or by mail.

  1. By Internet options: NETFILE or EFILE. The NETFILE option is for a taxpayer who wants to prepare his/her own tax return and send it electronically directly to the CRA. The EFILE option is for a taxpayer who has his/her tax return prepared by a registered electronic filing service provider who then sends the completed tax return to the CRA electronically on behalf of the taxpayer. Both options require that the tax return be prepared using one of the commercial tax preparation software packages or Web applications certified by the CRA to meet system requirements.
  2. By mail: Mail your completed paper tax return to the CRA tax center serving your region using the envelope included in your tax package.

How to contact CRA?

For Return Follow up wait at least 6 weeks after the return was submitted before following up. You can follow up on your refund on the Internet by accessing My Account, or by telephone by calling the Telephone Information Phone Service at 1-800-267-6999.

What are the Income Tax Penalties? And how to avoid it?

If you owe tax for the current tax year and do not file your return on or before April 30, then the CRA may impose penalties and interest. They will charge you a late-filing penalty. The penalty is 5% of your current year balance owing, plus 1% of your balance owing for each full month that your return is late, to a maximum of 12 months. Your late-filing penalty may be higher if you were charged a late filing penalty in any of three previous years. Liberty Tax Canada strongly suggests that, even if you cannot pay the entire amount on April 30 that you still file to avoid the late filing penalty.

Can I pay my tax owing on one or more Installments?

Income tax installments are periodic income tax payments that the individual tax payer has to pay to cover the taxes that they otherwise have to on April 30th of the following year. You may have to pay your taxes in installments if not enough income tax was withheld from your income.

If the CRA has determined that you might have to pay your taxes in installments, they will send you an Installment Reminder, the suggested amounts you need to pay and the dates the payments are due.

The installment threshold for individuals has increased to $3000 or $1800 if you were a resident of Quebec.

What are the credits claimed by Self-Employed?

Self-employment leads to so many advantages, so many expenses you can claim against your earnings, as long as those expenses contributed to your business. Some of these are the following:

  1. Home office
    The CRA requires only that you use a "reasonable" way to calculate how much of your house is used as an office. Based on the percentage of your office space compared to the whole space of your house, you can claim a percent of your rent, utilities, mortgage interest, property taxes and home insurance.
  2. Business use of a car
    You can claim the business use of your personal vehicle for credit against self-employed earnings. The best way to show the CRA you're on top of it is to keep a log book documenting your kilometers driven for personal and business purposes. When you determine the percentage of distance you drove your car for business use, you can claim that percentage of the car's expenses for the year. Auto expenses that reduce your taxes include: fuel, repairs and maintenance, auto insurance, vehicle license and registration fees, the capital cost allowance, interest paid on a car loan and lease expenses. The CRA considers driving to and from work to be personal use.
  3. Capital cost allowance
    Major purchases of equipment, a vehicle or a building are considered a capital expense. Capital expenses have the purchase value spread over the life of the item. The Income Tax Act sets out many capital cost allowance classes showing how to allocate the cost of a capital item each year, until its useful life is over. Each class has a percentage by which items lose value each year. This value becomes an expense credited against your self-employed earnings, reducing the amount on which you pay taxes.
  4. Other business expenses
    There are some expenses that you can only claim a portion, things such as meals, entertainment and advertising in certain Canadian magazines. Other types of allowed operating expenses include:
    - Accounting and legal fees;
    - Business taxes, licenses, association fees or dues;
    - Insurance premiums, bank fees and loan interest up to allowed limits;
    - Repairs and maintenance to buildings and equipment; and
    - Office expenses, such as supplies and telephone service.

Please refer to the CRA websirte for the most up to date Personal and Corporate Tax Rates: http://www.cra-arc.gc.ca/tx/llrts/menu-eng.html

How to inform CRA of a name change?

  1. If you change only your first name or last name, call 1-800-959-8281 to advise us of your name change.
  2. If you change your first name and last name, send the following by mail or fax to your tax centre one of the following documents:
    • A name change certificate from a provincial/territorial vital statistics department; or
    • A court order issued under an act on change of name;
    • Your old and new names;
    • Your social insurance number; and
    • Your signature.

For a listing of all Tax Centers please visit the CRA website at: http://www.cra-arc.gc.ca/cntct/prv/txcntr-eng.html

What are the corporate tax rates?

Federal rates
The basic rate of Part I tax is 38% of your taxable income, 28% after federal tax abatement.
After the general tax reduction, the net tax rate is 15%.

For Canadian-controlled private corporations claiming the small business deduction, the net tax rate is 11%. This rate will decrease to:

  • 10.5% effective January 1, 2016
  • 10% effective January 1, 2017
  • 9.5% effective January 1, 2018
  • 9% effective January 1, 2019

Provincial or territorial rates

Generally, provinces and territories have two rates of income tax – a lower rate and a higher rate.

Lower rate for Ontario 4.5%

The lower rate applies to the income eligible for the federal small business deduction. One component of the small business deduction is the business limit. Some provinces or territories choose to use the federal business limit. Others establish their own business limit.

Higher rate for Ontario 11.5%

The higher rate applies to all other income.

For other Provincial and territorial tax rates visit the CRA website: http://www.cra-arc.gc.ca/tx/bsnss/tpcs/crprtns/rts-eng.html