There is a very easy way to avoid paying penalties to Canada Revenue Agency – File on Time. Late filing penalties start at 5% of the balance owing; then for every month you procrastinate an additional 1% is added, to a maximum of 12 months. If filing late is a way of life for you (late in any one of the three preceding years), then the penalties increase to 10% of the balance owing plus 2% per month to a maximum of 20 months. Of course when you owe money to the government penalties are only one part of the extra costs you will face, interest is also charged at the prescribed rate – set quarterly.
Tax Tip – File on time, even if you can’t pay the balance owing.