In a normal year, today would be the personal tax filing deadline for most Canadians. But because April 30 falls on a weekend, the deadline for filing has been extended to the next business day, Monday, May 2, giving you an extra 48 hours.
Note that if you or your spouse or partner had self-employment income in 2010, your filing due date is actually June 15, 2011, but any balance of tax owing for 2010 should still be paid by Monday's deadline to avoid arrears interest on any amount outstanding. The interest charged on amounts owing varies by quarter and is now 5%, compounded daily, starting the day after the filing deadline.
The standard penalty for late filing is 5% of the amount owing for 2010 plus 1% of your balance owing for each full month that your return is late, to a maximum of 12 months. If, however, the CRA charged you with a late-filing penalty on your return for 2007, 2008 or 2009, your late-filing penalty for 2010 is 10% of your 2010 balance owing, plus 2% of your balance owing for each full month that your return is late, to a maximum of 20 months, for a total penalty of up to 50%.
It may seem like this annual article on the filing deadline is mere filler for financial papers this weekend. After all, since most Canadians traditionally expect a tax refund and have no balance owing and the penalty for late filing is based on having an amount outstanding, why the push to file on time?
Two reasons.
First, while it may appear you have no balance owing for 2010, it's possible that perhaps one day over the next few years, the CRA might reassess you, perhaps challenging the percentage of automobile expenses you claimed or questioning that "client entertainment" expense in Vegas last fall.
A subsequent reassessment which results in you owing tax for a prior year in which you filed late could result not only in arrears interest on the amount owing, but also in a retroactive late-filing penalty on the amount owed as a result of the reassessment. To add insult to injury, the CRA charges arrears interest on the penalty from the original due date of the return.
Second, if you owned foreign property with a total cost of more than $100,000, Form T1135, the Foreign Income Verification Statement, must be filed, in which you must state the types of foreign investments you own, the total cost of those investments, and their geographical locations. You are then asked to identify the total income you reported on your tax return from the identified foreign investments.
The penalty for failure to file that form on time, even if you reported all your foreign income, is $25 per day, to a maximum of $2,500.