Overwhelmingly rapid changes to public gatherings, travel restrictions, quarantines etc. all have domino effects for business. What does this mean for taxation and deadlines?
Many governments around the world have announced extensions and mitigating rules for taxation. The Canadian government has made many announcements in the past 2 months to help individuals and businesses through this crisis. The government and Canada Revenue Agency has been busy administrating these programs so that individuals and businesses receive benefits and tax relief. FAQs #3 and #4 of this series will highlight the many programs that are available to you.
The Canada Revenue Agency before COVID-19 already had programs in place for mitigating late filings and penalties for deadlines missed due to natural disasters etc. From those, we developed Best Practices.
Here are our best practices:
1. Be aware of whether it is a “hard deadline” or a “soft deadline”. A hard deadline is generally a payment deadline. For example, paying your GST or payroll late is a clear cut failure to meet a deadline and will result in a penalty. Whereas failing to file a refund return for income tax on time is a soft deadline. The actual law behind that tax deadline reads something like this. “You must pay your taxes on time” not “you must file your taxes on time” Thus if you are confident of a refund or you have a good idea of what you owe and make the payment on time the actual tax filing can be made after the deadline without penalty.
2. Check the penalty for later payment or filing. For example, if you file a GST return on time and later figure out that you miscalculated and short file and short paid by $10 on a $100 payment, you potentially owe penalties and interest on $10. In comparison, if you filed that same return late and paid late but made the correct payment of $110, you would owe penalties and interest on the full $110. It is better to file on time with the best information available and make corrections later. Compare a penalty on $10 to a penalty on $110.
3. Keep track of what might be making you miss the deadline. The Canada Revenue agency loves evidence. If you can’t make a deadline because the bank closed due to a COVID-19 order to close banks then you would have a clear reason for missing the deadline. However, CRA is not just going to take your word for it. Collecting documentation of why you missed the deadline is going to help you later. Another example: your flight was cancelled or delayed due to COVID 19 and you were unable to get to a bank or other payment options due to delays and quarantines beyond your control. You would want to save the quarantine notice or flight delay information.
4. File as soon as you can and let the penalty be charged. The Canada Revenue Agency has no mechanism to negotiate upfront with someone who will miss or is missing a deadline. The “machine” must process the penalties and then a “person” can be asked to look at them later and reverse them. Also if you try to contact them upfront you are likely to waste innumerable hours trying to reach an overloaded switchboard.
Grant Gilmour, B.Sc (Hons.), MBA, CPA, CA, CICA – ITC
Partner, Gilmour Group CPA’s
Disclaimer: The information contained in this article is intended solely to provide general guidance on matters of interest for the personal use of the reader, who accepts full responsibility for its use. While we have made every attempt to ensure the information contained in this article has been obtained from reliable sources and accurately described herein. SW Media Group and Gilmour Group Incorporated is not responsible for any errors or omissions, or for the results obtained from the use of this information. Before taking any action that might affect your personal and business finances, you should consult a qualified professional advisor.