With just hours left until this year’s tax-filing deadline at end of day May 2, Canadians everywhere are scrambling to get their tax returns in under the wire.
If your clients, their spouses or partners were self-employed in 2015, they actually have an extra six weeks or so to file, until June 15. But even if your clients are among those Canadians who have until mid-June to file, you should remind them to take the time today to do a quick estimate of any taxes owing, perhaps by using a web-based tax-preparation software package. You can then advise them to make an online banking payment to the Canada Revenue Agency before midnight to avoid being charged non-deductible arrears interest at the current prescribed rate of 5%, compounded daily.
The good news is that if your clients miss tonight’s midnight deadline, they will only face a penalty if they actually owe money. The penalty starts at an automatic 5% of the balance owing if you are even one minute late. It then increases by 1% of the outstanding balance owing for each full month that a return is late, to a maximum of 12 months. Those penalties can double if you were subject to a late-filing penalty for any of the previous three taxation years.
As a final reminder, May 2 (or June 15) is also the deadline to complete Form T1135 to report ownership of any foreign investment property if the total cost of that property was more than $100,000. That includes shares of non-resident corporations, even if held in a Canadian non-registered brokerage account, but excludes a personal foreign vacation property or mutual funds that own foreign securities.
The penalty for failing to file this form on time is $25 a day, to a maximum of $2,500. If your clients knowingly, or under circumstances amounting to “gross negligence,” fail to file the form, the penalty jumps to $500 for each month the form is not filed to a maximum of 24 months.
New for the 2015 taxation year are changes that allow clients who held specified foreign property with a total cost amount of less than $250,000 throughout the year to report under the “simplified reporting method” rather than providing the detail of each such property. The current detailed reporting method, however, will continue to apply to clients who, at any time during a year, held specified foreign property with a total cost of $250,000 or more.