Post Tax Analysis
Hello All,
The deadline for submitting tax returns, unless you or your spouse are self employed, has passed. Many (especially tax preparers) are breathing a collective sigh of relief as the stress (often relating to simple procrastination) has largely dissipated. Of course there are still a few of you who have not yet been able to file. If you have not filed and are not an unincorporated small business/self employed, then you will be charged penalties based on the amount due. You should try and file as soon as possible as the late filing penalty is 5% immediately and then 1% every month of the balance due. Alternatively, if you can’t file, pay as much of your estimated taxes as possible to reduce the amount of penalty. If you are expecting a refund, then there are no penalties, however any support or credit payments will be help up until you file.
Below I have enumerated a list of what to expect, and do, post tax filing:
If you have filed your tax return, it is likely that you received a notice of assessment almost immediately from Revenue Canada (CRA). This is referred to as an express notice of assessment. The proper notice of assessment is usually posted a couple of weeks later.
Revenue Quebec usually takes a couple of weeks to post your assessment online and also generally sends you a copy via mail.
If you are signed up for my account with CRA (which I encourage everyone to do), you can retrieve your notice of assessment from there. You should review it and download it as a PDF, once available and save it in your tax folder on your computer as you might need it or information from it in the future.
The notice of assessment (NOA) will summarize your tax return, indicate any changes which might arise from missed slip or incorrect data entry. It also gives you other valuable information which you can see in my blog post on what is a notice of assessment
If you find that you have made an error on your tax return or is there is a discrepancy on your NOA, you can file an amended return. You have to wait for your NOA before doing this however since CRA might actually pick up the discrepancy and reflect it on the NOA.
If you have taxes payable, you should try and pay these as soon as possible to avoid additional interest which has increased significantly compared to previous years. If you are not able to pay your taxes, you should call CRA to make a “payment arrangement” that allows you to pay in small instalments. Note that they do charge interest but it is better than getting a letter of collection of having them take it directly from your bank account.
If you are reporting business income on your tax return, you have until June 17th to file without being assessed a penalty. However, they start charging interest on any amount due on May 1st.
Pay attention to your instalment payments that CRA will send or post to your account to those of you who owe more than $3k in tax (or $1.8k in Quebec) . Non payment of instalments results in interest which is a waste if you have the funds to pay them.
If you receive a notice from CRA asking you for additional information, do not ignore this or wait for the last minute. If you are having trouble deciphering what they want, you can call them directly or speak to an accountant. My blog post discusses this in greater detail.
If you haven’t already, it is very useful to have a tax folder on your computer where you can save electronic or scanned documents relating to next years taxes. This will save you time, headaches when trying to find documents and potentially money as it will trigger your memory about tax credits such as a donation that you made earlier in the year that you will likely have forgotten about when doing next years taxes.
Finally, for some reason if you haven’t received your notice of assessment from CRA or RQ within a few weeks of filing your return, you should call them to find out the reason for the delay.
The majority of tax returns filed by Canadian taxpayers are pretty straightforward and don’t result in audits. The key takeaways here are that you review your notice of assessment, ensure you pay any taxes payable or at least make an arrangement to pay it and ideally set up a system for next years taxes to somewhat mitigate the stress.
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From the Blog
What is a notice of assessment and How to Handle a request for information
After you file your income tax return Revenue Canada (CRA) and Revenue Quebec (RQ) will send you an acknowledgement (somewhat like a report card) that the return has been received and a detailed break
How to Change Your Personal Tax Return After It Has Been Filed
Revenue Canada recommends that you should wait to receive your notice of assessment (NOA) before filing an amended return. Once you receive your NOA, you should review it to verify if the error or
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Tax Stuff :
The importance of responding to CRA assessments on time: This taxpayer was one day late and had their appeal to their reassessment denied by both CRA and the tax court of Canada.
Maybe don’t rush to sell your assets before the capital gains rate goes up: This article discusses situations where you might not want to dispose of assets. If you were planning to sell something soon, then it might make sense to do it before June 25th, when the new capital gains rules become effective. However, if your holding time horizon is longer, than it might not make sense to pay tax now or make a bad decision.
Tax ‘“enigmas” that trip people up: This article at WealthSimple does a reasonable job of explaining ostensibly difficult tax concepts such as tax brackets and marginal tax rates that sound complex but are actually simpler than they seem.
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