Canada’s 2021 tax deadline is still April 30. Despite renewed school and business shut-downs in parts of the country due to the third wave of the COVID-19 pandemic, Ottawa did not prolong the tax season this year.
April 30 is the cutoff for turning in your individual income tax return and paying any taxes owed. As usual, if you’re self-employed, you and your spouse or common-law partner have until June 15 to hand your tax paperwork over to the Canada Revenue Agency. But you still need to pay any tax balances by the end of April.
Filing and paying taxes by the deadline is always a good idea but may be even more important this year if you’re receiving COVID-19 benefits.
“If you don’t file, you could see a delay not just in your Canada Child Benefit (CCB), but also any income supports that you may apply for,” says personal finance expert Rubina Ahmed-Haq.
Even you don’t owe any taxes, you must file a tax return in order to access any tax credits and benefits you might be entitled to, such as the GST/HST tax credit, the CCB, as well as the Old Age Security pension and the Guaranteed Income Supplement.
This year, though, late filing could also result in disruptions to COVID-19 income support payments. Filing your 2019 and 2020 taxes by April 30 is the “best way” to ensure your benefits application is processed within three to five days, the CRA has said. But the tax agency has warned that if it doesn’t have all the required information on file, it may take up to eight weeks to process a benefits application from the time the necessary information comes in.
In other words, a late tax return could significantly delay your COVID-19 benefit payments at a time when you may already be facing financial hardship.
What if you owe taxes?
There’s another strong incentive to do your taxes on time: avoiding penalties and interest.
If you’re late turning in your 2020 tax return and owe taxes, the CRA will charge you a late-filing penalty that’s five per cent of your 2020 tax balance, plus another one per cent of your balance for each month your return is late, to a maximum of 12 months. On top of that, the tax agency will charge compound daily interest on your unpaid 2020 taxes, also starting May 1, 2021. (You can look up the rate of interest on the canada.ca website.)
“Sticking your head in the sand is not a good option,” Ahmed-Haq says. “Owing money to the CRA is very expensive.”
The good news is the CRA said it won’t be charging interest on 2020 taxes owing if your taxable income is $75,000 or less and you received one or more COVID-19 benefits in 2020. The interest relief will be in place until April 30, 2022, the tax agency said.
However, you still have to file your 2020 return by the deadline to avoid the late-filing penalty. Also note that the interest relief only applies to any 2020 taxes owing, not tax debt from previous years.
If you don’t qualify for interest relief and can’t pay your tax bill in full by April 30, the CRA expects you to put in your best effort to find the funds to pay the government, including by borrowing the money, Ahmed-Haq says.
If you must borrow, the ideal course of action would be borrowing from a low-interest loan or line of credit to pay off your tax bill and then setting up a payment plan for yourself to extinguish your debt as soon as possible, Ahmed-Haq says.
If you still can’t pay in full even after trying to borrow or rearranging your finances, you can try asking the CRA to set up a payment arrangement. However, the CRA will still charge daily compound interest on any balance owing after May 1 until you pay your balance in full.
Still, the CRA may cancel or waive any interest or penalties if you can’t meet your tax obligations due to circumstances outside of your control, notes Bruce Ball, vice-president of taxation at CPA Canada.
“These are extraordinary situations, and if someone is assessed late-filing penalty — especially in May, if that’s not too far after the deadline — I would hope that CRA would reverse it,” Ball says.
Accountants concerned about decision not to extend the deadline
Ball says he’s concerned about the CRA’s decision to stick with the April 30 deadline this year.
The U.S. announced in March it would extend its federal folding and payment deadline from April 15 to May 17. And in Canada, Revenue Quebec said it will not start charging interest or imposing penalties until May 31, 2021.
“We’ve been discussing (an extension) with the federal government for several months now,” Ball says. But so far, Ottawa isn’t budging.
“Extending filing deadlines this year would risk interrupting essential credit and benefit payments for millions of Canadians; payments on which thousands of Canadians rely,” the CRA told Global News in an emailed statement.
The agency also said it is “monitoring” the impact of the COVID-19 pandemic across the country and has expanded payment arrangement options.
Still, Ball says many professional tax-fillers are under tremendous strain this year. On one hand, tax pros are facing an onslaught of new, pandemic-related tax and benefits provisions. The federal wage and rent subsidy programs for businesses, for example, require monthly applications, which is resulting in extraordinary workloads for many accountants, according to Ball.
On the other hand, some of the small and medium-sized accounting firms are facing staff shortages due to sickness, personal issues and stress, he says.
“We were really hoping … that the government would make an announcement to give people more time.”