Should you file a tax return?

The days are getting longer and the temperatures of late have become bearable. With spring upon us so too is the deadline for filing your personal tax return. But do you have to file a tax return by April 30th? If you do not have to file a tax return why would you?

There are certain circumstances whereby you do not have to file a tax return. Not owing any taxes may be one reason not to file. However even if you do not owe taxes there are a number of reasons why you still might want to file a tax return by April 30th. Some of the reasons include:

• Even if your income level is minimal, so that you are below the basic taxable threshold, the GST/HST credit and the Child Tax Credit are only available if you file your tax return.

• Although the Guaranteed Income Supplement for low income seniors can be reapplied for outside of a tax return, filing a tax return will ensure you continue to receive the supplement provided you still qualify.

• RRSP Contribution room is earned based on employment income and some other types of income. To ensure you build your RRSP contribution room you must file a return.

• Tuition and Education credits that can’t be beneficially used by the student because income is generally minimal for university students can be carried forward and used in years when the student begins working full time or transferred to a parent or grandparent. (The credit generally provides a tax reduction/savings of 20% independent of income level). To take advantage of this carry forward of credits a return has to be filed in the year they are earned.

If you owe taxes but do not have the money to pay the taxes by April 30th it is still advisable to file your tax return by the deadline. This is because there is a penalty for late filed tax returns. For first time offenders the penalty is equal to 5% of the tax payable at April 30th plus 1% for each month the return is late up to 12 months. For more prolific offenders the penalty can be as high as 46%. Interest will still apply on unpaid taxes at April 30th but the penalty will not if the return is filed on time.

Individuals who have not filed returns for a number of years and are concerned about penalties for past years that have gone unfiled may be eligible for Canada Revenue Agency’s Voluntary Disclosure Program. I have discussed this at greater length in a previous article. If you qualify under this program the penalties associated with the unreported or underreported amounts may be waived. Interest will normally still apply on the unpaid amounts.

The deadline for filing your 2010 tax return is April 30, 2011. This year April 30th is a Saturday. Canada Revenue Agency considers your payment to be paid on time or your return to be filed on time, if we they receive it or if it is postmarked on the next business day – Monday May 2, 2011. If you or your spouse or common-law partner carried on a business in 2010, your return has to be filed on or before June 15, 2011 (although the taxes are still payable by April 30, 2011).

Filing a tax return each year is a good habit. The consequences of not filing can be an unpleasant financial burden. Although the deadline is still weeks away, the end of April is a busy time for Accountants. To ensure you receive the tax credits and attention you deserve make an appointment to see your Chartered Accountant today.

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.