April 15, 2014

By Margaret H. Johnson

Spring is sprung, the grass is ris. The days are getting longer. The sun is back. All is good. Except for those piles of receipts, bank and credit card statements that sit in the other room.

Some people would rather have a root canal or spinal tap than do their taxes. You know what? It ain’t that bad.

You see, doing your taxes is the moment of truth for our personal finances. It’s actually a learning experience for many of us. As we go up and down the bank statements we see, one entry at a time, where we spent our money and how much we made.

This is the great benefit of technology. We can use it for filing our taxes.

For small proprietorships and home-based businesses, you can let the bank do all the work. For example, you could dedicate one credit card for all of your business expenses – and one bank account for most of your business expenses - I say most of your business expenses because household family expenses normally come out of a joint bank account with your spouse which would include the rent and mortgage payment, utilities and property taxes – legitimate business expenses for small and home based businesses.

For non-business people, you can dedicate your credit card statements for specific expenses like gas and car maintenance. A second card could be used for clothing expenses. Perhaps a third card could be used for family vacations and entertainment.

The credit cards and bank statements become mini-accountants keeping meticulous track of where the money is going.

Now, it goes without saying that the credit cards should all be paid off every thirty days – even though the top 20%, as reported by the Centre for Policy Alternatives in a recent article about wealth, own 70% of the wealth and claim 50% of all income.

There is nothing better for financial planning than to examine in miniscule detail our expenses and income.

Now, there are other reasons to get into the outer room and complete the dastardly deed of filing your taxes. There are penalties if you owe the government any money and file late.

As outlined on the CRA website:

Interest

If you have a balance owing for 2013, we charge compound daily interest starting May 1, 2014, on any unpaid amounts owing for 2013. This includes any balance owing if we reassess your return. In addition, we 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. See Prescribed interest rates.

If you have amounts owing from previous years, we will continue to charge compound daily interest on those amounts. Payments you make are first applied to amounts owing from previous years.

Interest on unpaid taxes may be waived or cancelled under certain circumstances. See Taxpayer relief provisions.

Late-filing penalty

If you owe tax for 2013 and do not file your return for 2013 on time, we will charge you a late-filing penalty. The penalty is 5% of your 2013 balance owing, plus 1% of your balance owing for each full month your return is late, to a maximum of 12 months.

If we charged a late-filing penalty on your return for 2010, 2011, or 2012 your late-filing penalty for 2013 may be 10% of your 2013 balance owing, plus 2% of your 2013 balance owing for each full month your return is late, to a maximum of 20 months.

Tax tip

Even if you cannot pay the full amount of your balance owing on or before April 30, 2014, you can avoid the late-filing penalty by filing your return on time.

We 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.

For a penalty, 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 2014 must relate to a penalty for the 2004 or a later tax year.

For interest on a balance owing or on a penalty for any tax year, the amounts that accrued during the 10 calendar years before the year in which you make the request will be considered. For example, a request made in 2014 must relate to interest that accrued in 2004 or a later calendar year.

For more information, go to Taxpayer relief provisions, or see Information Circular IC07-1, Taxpayer Relief Provisions.

Remember, if you are experiencing financial difficulties do not wait. Call Solutions Credit Counselling at 1(877)588-9491 or fill out our Debt Consolidation Questionnaire and get your Free Credit Counselling Advice today.

For more information visit Debt Canada - your Canadian credit education centre.

If you are a woman in debt, speak with Women and Money first. We specialize in helping women with their personal and business financeMoney management advice you can count on!


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