Long jail sentences. A record that will follow you for the rest of your life. And at the very least, being faced with an audit by the CRA. All of these are just some of the things that can happen to you if and when you don’t pay your taxes. Or at least, they’re things that we think will happen if we don’t pay our taxes. But what happens really? What kind of penalties will you face, and how much money will you have to pay?
The deadline to file taxes was at midnight on April 30, unless you’re self-employed and then you have until June 17. If you’re late filing and you don’t owe any money to the government, you won’t have to pay any penalties just for being late. But that doesn’t mean it won’t cost you. Not filing will delay any return you’re entitled to, and it will also hold up things such as the GST and Child Tax benefits, as these are determined using Canadian tax returns.
But what if you do owe money? How much do you owe then? If you owe money on your tax return, it’s due on May 1. And if you don’t pay the taxes before then, you’ll start racking up penalties. Those penalties start at 5 per cent, taken right off the top from whatever amount is owing. From there, you’ll be charged 1 per cent per month for every month that you are late, as well as a compound daily interest on the total amount due.
But what happens if you don’t pay one year, and then don’t pay again the following year? Or two years after? If you’re late in filing your taxes more than once in a four-year period, the penalties become much bigger, and they could even double.
But don’t be tempted to just not file your return at all, even if you’re okay with missing out on all those other tax credits because of it. If you do this more than twice within a four-year period, you’ll be hist with a “repeated failure to report income” penalty – and that will cost you 20 per cent of your income for the most recent year.
Yes, unfortunately income taxes are a big deal. And yes, even more unfortunately, you do have to pay them. If you don’t, you could be looking at some pretty big penalties, and maybe even jail time.
“People do go to jail,” says Toronto tax lawyer Jonathan Garbutt, when speaking about tax offences. “People don’t go to jail for as long as they do in the U.S., but it does happen.”
