Because online computer service was interrupted for five days due to the Heartbleed bug, the Canada Revenue Agency (CRA) extended the tax-filing deadline of 2014, until May 5th. Still, despite this deadline, many people found themselves in the stressful situation of having tax problems due to unreported income, tax avoidance, or unfiled tax returns. Tax problems are incurred because people misunderstand the complexities of Canada’s self-assessment tax system. Many taxpayers fail to report their income and accumulated unfiled tax returns create increased tax problems. Steep interests and penalty charges by the Canadian Revenue Agency (CRA) in lieu of late or unfiled taxes occur when individuals panic and file before understanding the personal consequences. Be aware that in addition to the owed taxes, all penalties charged by CRA, are added amounts. The penalties for late filing can be very excessive for repeat offenders.
Individuals defaulting for the first time on unfiled taxes can be charged penalties as great as 17% of the total tax amount. In cases of repeated offenses for unfiled taxes, the default penalty for the tax amount can total as much as 50%. In addition to the penalties that are mentioned, these same amounts are compounded on a daily basis at an extremely high interest rate charged by CRA on the total tax and penalty balances. Individuals owing years of tax debt will be paying more than half of the principle amount in interests and penalties. People burdened with years of unfiled taxes, who do not take action to file these back taxes, risk conviction and charges of criminal offense and tax evasion. Also, notices of guilt will be publicized all over Canada by the CRA.
In an effort to encourage individuals to come forward and comply with Canadian tax laws and avoid prosecution and stiff penalties, the CRA has initiated the Voluntary Disclosures Program (VDP). The Voluntary Disclosures Program allows the taxpayer to pay only the taxes owed and the interest. Individuals must decide whether or not to tackle the problem themselves or hire a representative from a tax firm. When hiring a tax firm, it is important that your tax needs are matched with a firm having genuine tax professionals with an abundance of experience. The benefits of hiring a tax firm definitely outweigh the costs. These firms usually offer a free initial consultation, which includes an assessment of the individual’s tax and financial circumstances to determine the best choice of service options, and to determine an estimate for the cost of those services.
When a firm is hired, the taxpayer’s case is designated to a competent individual tax professional or professional team. The representative is allowed power of attorney to request transcripts and records, as well as future correspondence between the individual and CRA. Tax professionals, like those found at Tax911 Now! (head over to Tax911now.ca/unfiled-tax-returns-to-cra/ to learn more), ensure that the tax resolution process fully complies with all of the tax filings. Once the taxpayer is in full compliance, the tax professional will determine the settlement or resolution action that is most advantageous. It is not an overnight process, but once complete, the individual is in good standing. The firm’s tax professionals will also advise the taxpayer on ways to avoid problems with taxes in the future.