The deadline for filing your 2021 income tax return with the Canada Revenue Agency “CRA” is fast approaching. April 30th, 2021 is the deadline for individuals to file their 2020 income tax returns. The deadline for people who are self-employed or whose spouse/ partner is self-employed is June 15, 2021. It is very important to be aware though, that despite the filing deadline being June 15th, the payment deadline is still April 30th and interest is accumulating after that date.
What if I owe income tax?
Ignoring tax debt won’t make it go away. If you owe income tax, it is important to file your return by the deadline. In fact, it may be even more important because failing to file by the deadline will result in both interest charges and a late filing penalty. The penalty is 5% of your 2020 balance owing, plus 1% of your balance owing for each full month your return was filed after April 30, 2021, to maximum of 12 months.
Contacting CRA to make payment arrangements can be a means to get back on track. CRA has an on-line calculator to help set up payment arrangements.
COVID 19 benefits and tax debt
If you received Covid 19 benefits in 2020, this income is taxable. The CERB benefit was not taxed at source, and as a result many individuals are finding themselves with tax debt. CRA is providing interest relief on 2020 income tax debt related to receipt of COVID 19 benefits for qualified individuals. If you meet the eligibility requirements, you will not have to pay interest on the amount owing on your 2020 taxes. until April 30, 2022. In order to qualify for the interest relief you must have received a Covid 19 benefit in 2020, had a taxable income of $75,000 or less and filed your 2020 income tax return.
What If I cannot make afford to pay my tax debt?
Any debt can be overwhelming – including income tax. If you find yourself in a situation where you have no way to pay tax debt you may want to consider your options to get yourself back on track. Contrary to popular belief, income tax debt is dischargable debt pursuant to the Bankruptcy and Insolvency Act. Income tax debt can be included in both bankruptcy and consumer proposals. Income tax debt is unsecured debt just like credit card debt. When you speak to a Licensed Insolvency Trustee (LIT) we will look at all your options and discuss the pros and cons of each. We are happy to meet with you in person in Kentville or Halifax, or to discuss your situation via phone or videoconference.