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Fredericton Daily Gleaner ~ Capital Appreciation ~ Deadline ~ April 30, 2007 - 06 May 2007 by TaxHelp

Filing Deadline.
Roger Haineault – “Capital Appreciation” – April 30, 2007.

Here it is – B-Day! Okay, Balance-due Day doesn’t sound as dramatic but today is the day we must file our 2006 T1 Income Tax Return if we owe on our personal tax account (and provided we’re not self-employed). Otherwise, late penalties will be applied. Returns must be postmarked by midnight tonight (April 30) 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 Thursday when they had received 15.9 million returns – a slight increase over the same period last year. Since they expect to receive almost 26 million returns this year, you can well imagine how busy the past few days have been. As an aside, the average refund this year is running $1,219 – a decrease of about three per cent from last year. So for many of us – today literally is the day!

In the paper filed return channel (6.3 million) there is a deficiency of almost a quarter of a million returns compared to last year. This is probably due to the fact that more and more Canadians are embracing the electronic filing technologies while some of it can be attributed to a backlog of mail at the Taxation Centres as a result of the early season intake challenges experienced at the CRA. Telefile (which is filing by phone and was piloted in New Brunswick in the early nineties) represents more than half a million returns. Professional tax filers have submitted more than six million returns through the various EFILE options.

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, the majority 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 our full legal deductions, exemptions and credits are as well.

Another myth has appeared 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.

I should point out that sometimes criminal investigators are brought in from the Agency in situations that warrant filing non-compliance. Over the past couple of years, hundreds of investigations were referred for prosecution. During the same period the courts imposed $14.4 million in fines and sentenced offenders to a combined total of 33 years in prison.

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. In addition to any penalties, there is also interest charged on any outstanding tax balances. The current rate charged is nine per cent.

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. If you need a hand, our offices are opened this evening until the last customer is served.

Roger Haineault is with Help 4 Taxes. He can be reached by email at roger@help4taxes.ca or by calling 443-HELP (4357). His column appears Mondays.