What Happens if You Don’t File Your Tax Return in Canada?
Most Canadians have to file a tax return every year. However, many Canadians are late in filing their tax returns for various reasons; people:
- Don’t suspect that they will owe, so they don’t file
- Know they will fall into debt and have no money to pay back
- mistakenly believe that if they do not report, they will not be detected and will not have to pay
- Have lost records or receipts and have no idea what they earned and can’t prove or estimate what their costs were
- find that dealing with a late tax return is so overwhelming once it has already happened that they think if they avoid it, it will eventually go away
You may ask yourself what happens if you don’t file your taxes in Canada or if you file your taxes late. These two situations are different and the penalties for each are different. Failure to file your taxes when required can be considered a criminal offense, so it is essential to file your returns, even if they are late and cannot afford to pay your taxes.
What Happens if You Don’t File Your Taxes?
If you are obligated to file a tax return, you must comply with the law. It isn’t a crime to owe tax debt, but it is a crime not to file taxes if required.
Every day that you are late with your returns can be considered as tax evasion. Tax evasion is where an individual or company deliberately ignores Canadian tax law. If you do not file your income taxes on time, you are ignoring Canadian tax laws. The Canadian Revenue Agency may consider this to be a conscious attempt to avoid paying taxes. There are hefty fines for tax evasion, including fingerprinting, court-ordered fines, imprisonment, and possible criminal records. This can hurt your goodwill and future.
As previously stated, it is not illegal if you owe tax and money to the CRA (Canada Revenue Agency). It is, however, against the law not to file tax returns.
Even if the CRA does not prosecute you for tax evasion, it is still possible that you may suffer losses by filing your taxes late. The CRA may charge significant penalties and interest on the tax debt you owe. The more you wait and the more time passes on your late tax return, the more you will accrue huge penalties and interest. You could even be charged.
If you are repeatedly late in filing your taxes (or fail to file them at all), these penalties will increase. This makes it incredibly difficult for you to pay your debts, putting a significant strain on your budget.
Even if you can’t afford the tax debt, you should still file on time to avoid fines and penalties.
Some people mistakenly believe that they can avoid filing taxes and the CRA will not find out that they owe. This is not true. The CRA is a large and powerful organization and while it may not contact you right away if you don’t file your tax return on time, it will eventually discover the problem. If the CRA finds out that you are late with your return, it will use its power to recover what is owed.
If you do not make a declaration, the CRA may carry out a Notional Assessment on your behalf and estimate your income, expenses and other amounts. It can then use this estimate to calculate how much tax you owe. In making the assessment, the CRA looks at all sorts of information and makes (often wild) suppositions. Based on this, they may estimate your tax debt, interest and penalties and then collect the estimated tax debt.
No one wants that to happen, so the easiest way is to file your returns on time.
Let us know in the comment section if you ever had late fees for filing your tax return late.