If you are entitled to a refund, the earlier you file, the earlier you will get your money back from the Canada Revenue Agency (“the CRA”). The CRA is getting pretty quick at processing returns as they come in, but they are faster earlier in the tax season than they are later in the season. You will notice a big difference in turnaround time between filing your return in March or early April when compared to filing in May or June if you are entitled to a refund.
If you owe taxes, then filing late is a bad idea. The CRA levies penalties for late filed returns as follows – if it’s not a repeat offence:
five percent of the balance owing, and
one percent of the balance owing for each full month that your return is late, to a maximum of 12 months.
If you were charged a late-filing penalty in one of the previous three years (a repeat offence) and are late filing your income taxes again, the CRA will charge a penalty of
ten percent of the balance owing for the current year, and
two percent of the balance owing for each full month that your current income tax return is late, to a maximum of 20 months.
If you owe taxes, on top of the penalties noted above, the CRA will charge interest to you not only on the taxes you owe, but on their penalties! So the interest can really add up, since the penalties aren’t calculated and sent to you in a Notice of Assessment until the CRA gets around to it. So if they take their sweet time to do this, guess what? You pay more interest, and the interest keeps on building until you pay off the balance owing.
The biggest reason of all is this: who wants to be fiddling around with their tax return in the summer, when you could be outside enjoying our nice Canadian summers?!