Be aware of Interest and penalties on filing your 2011 tax returns
Mohammed Yasin, B.A. C.G.A.
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This column is presented as a general source of information only and is not intended as a solicitation for business. It is always recommended that you consult a qualified tax professional beforeembarking on any of the suggestions outlined above. Mohammed Yasin, CGA, is the principal of M. Yasin & Co. Inc., Certified General Accountants and has offices in Vancouver & Surrey,B.C. For more information on this topic or any other taxation matters, please contact firstname.lastname@example.org.
If you have a balance owing for 2011, Canada Revenue Agency (CRA) will charge compound daily interest starting May 1, 2012, on any unpaid amounts owing for 2011. This includes any balance owing if we reassess your return. In addition, CRA will charge you interest on the penalties starting the day after your return is due. The rate of interest we charge can change every three months.
If you have amounts owing from previous years, CRA will continue to charge compound daily interest on those amounts. Payments you make are first applied to amounts owing from previous years.
If you owe tax for 2011 and do not file your return for 2011 on time, CRA will charge you a late-filing penalty. The penalty is 5% of your 2011 balance owing, plus 1% of your balance owing for each full month that your return is late, to a maximum of 12 months.
If CRA charged a late-filing penalty on your return for 2008, 2009, or 2010 your late-filing penalty for 2011 may be 10% of your 2011 balance owing, plus 2% of your 2011 balance owing for each full month that your return is late, to a maximum of 20 months.
CRA may waive or cancel this penalty as well as any interest that may apply if you file your return late because of circumstances beyond your control. If this happens, complete Form RC4288, Request for Taxpayer Relief, and mail it to the intake centre responsible for your province or territory of residence.
Only requests relating to tax years ending in any of the 10 calendar years before the year in which you make the request will be considered. For example, a request made in 2012 must relate to the 2002 or a later tax year to be considered.
Repeated failure to report income penalty
If you fail to report an amount on your return for 2011 and you also failed to report an amount on your return for 2008, 2009, or 2010, you may have to pay a federal and provincial/territorial repeated failure to report income penalty.
The federal and provincial/territorial penalties are each 10% of the amount that you failed to report on your return for 2011. However, if you voluntarily tell CRA about an amount you failed to report, CRA may waive these penalties.
Ali has been a resident of B.C. all his life. At the time he filed his 2008 return he forgot to report $850 of interest income he received that year. In 2009, CRA reassessed his return to include the unreported income. When Denis filed his 2010 tax return in 2011, he failed to report $1,500 of employment income he earned. Later that year when CRA reassessed his 2010 return to include the unreported employment income, Ali was charged a $300 penalty ($150 federal + $150 provincial) for repeated failure to report income. The penalty was charged because Ali failed to report on his 2010 return income that was required to be reported and one of his tax returns for the three previous years was reassessed for the same reason.
False statements or omissions penalty
You may have to pay a penalty if you, knowingly or under circumstances amounting to gross negligence, have made a false statement or omission on your 2011 return.
The penalty is equal to the greater of:
· $100; and
· 50% of the understatement of tax and/or the overstatement of credits related to the false statement or omission.
However, if you voluntarily tell us about an amount you failed to report and/or an overstatement of credits, CRA may waive this penalty.