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NB Telegraph-Journal ~ The Bottom Line ~ Tax Deadline ~ May 1, 2006 - 08 May 2006 by TaxHelp
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Here it is – B-Day! Okay, Balance-due Day doesn’t sound as dramatic but today is the day we must file our 2005 T1 Income Tax Return if we owe on our personal tax account (and provided we’re not self-employed). Otherwise, late penalties and interest will be applied. Returns must be postmarked by midnight tonight (May 1) in order to be considered filed on time. Haven’t started yet? Don’t worry, you’re not alone. The previous relevant public count the Canada Revenue Agency (CRA) made was last Wednesday evening when they had received 16.48 million returns. The next relevant count will be this Wednesday evening. Last year, this period (which included the filing deadline) yielded 4.26 million returns – an outstanding 20 per cent of the total, primarily completed on the last weekend. As an aside, the average refund this year is running $1,258 – an increase of more than 10 per cent over last year. So for many of us – today literally is the day!
There are a number of urban legends that have become popular over the past number of years for those who feel they don’t have to file and pay income tax. Some people believe that federal income tax is unconstitutional, since it would appear that the Canadian Constitution gives the power of direct taxation exclusively to the provinces. Although Section 92 does allow the imposition of “direct taxes within a province”, Section 91 says that the federal government can raise money “by any mode or system of taxation”. No court in Canada has ever agreed with the idea that the federal government cannot levy income taxes.
There are others who have not filed returns for years, and claim that the government has not forced them because the Income Tax Act is unconstitutional. The requirement to file is well spelled out. Anyone with young children knows that the government has not demanded them to file. They realized that not everyone need file. Some people have no taxable income, while others have no taxes owing because of the excess collected through source deductions. After all, almost 85 per cent of people filing either owe nothing or receive a refund. However, only by filing a return does one get to enjoy the benefits of inclusion into the myriad of government benefit programs, or refunds that may be due.
Since Canada’s tax system is based on voluntary compliance, there are those who feel that they don’t have to volunteer. The principle of self-assessment is one that is cherished. In many countries of the world, taxes are levied at the discretion of the government, and taxpayers do not have a say. Imagine if at the end of the year, you received a bill from Ottawa, payable upon receipt. Voluntary compliance gives us all a chance to figure out what our legal obligations are, and also what are full legal deductions, exemptions and credits are as well.
The CRA website has also updated another myth that may appear as a result of technology. Be aware that there is no such thing as an e-audit. Do not furnish any personal information (including banking and other financial data) as a result of a request from the government by email, since data is not collected in that fashion, and you will be opening yourself up to become a victim of the numerously similar scams currently circling the globe.
Last year New Brunswick taxpayers who filed after the due date had to pay late filing penalties in the neighborhood of half a million dollars. These individuals still had to pay the full amount of taxes owing, plus interest in addition to the late-filing penalties.
Late-filing penalties for the first time offender is five per cent of the balance owing, plus one per cent for each full month that the return is late, to a maximum of 12 months. Repeat offenders pay more. I should remind you that there is an amnesty program. Basically, anyone who comes forward and files overdue returns, or discloses formerly omitted information will not be subject to penalty (but they will be responsible for tax liability and interest). The caveat is that the full disclosure has to be before the CRA starts any investigation or action.
Finally, if you owe, but cannot afford to pay, file on time anyway. This way you avoid the penalty. Then have a discussion with the people in collections after your return is assessed. A friendly approach goes a long way when trying to negotiate a payment plan.
Roger Haineault is with Help 4 Taxes. He can be reached with specific questions or suggestions by calling 506-693-1212 or by e-mailing him at roger@help4taxes.ca. His column appears Mondays. |
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