With so many different business structures and types of taxes, it’s not always easy to determine when you need to pay your tax balance. To add to the confusion, your filing deadline is often not the same as when you actually need to pay any balance – making interest and penalties a common occurrence and a nasty surprise.
As you may assume, if you have taxes owing and miss a filing deadline, you could be hit with a big late penalty charge. Yet as some filing deadlines are after the balance due date, you may be hit with some interest even if you get your return in on time!
To avoid costly interest and penalties as well as unfriendly calls from the CRA, it’s a good idea to clarify which taxes you owe and when so you can plan ahead and meet your deadlines.
Most Canadians need to file a T1 personal tax return. It’s on this return that you declare your worldwide income from business, employment and investments and claim any personal deductions for items such as donations, medical expenses and dependents.
As an employee, if you don’t have any self employed income (be it a full time business or a lemonade stand) you need to file a tax return by April 30th.
Around personal tax season, you may hear a lot of talk about maximizing your refund. Since employers are obliged to deduct taxes off your paycheque, most employees will have overpaid tax once personal deductions are taken into account and will get a portion of their tax paid refunded. Unfortunately, if your employer didn’t deduct an appropriate amount of taxes, or you have additional income from other sources such as investments or rental properties, you’ll likely have taxes owing.
If you have personal taxes owing, these will need to be paid by April 30th.
If you’re self employed yet unincorporated (sole proprietors, subcontractors and most partnerships) your filing deadline will be June 15th.
The catch here is that your taxes are still due on April 30th with everyone else.
To avoid interest charges, it’s a good idea to pay an estimate of taxes owing by the balance due date if you know you won’t be able to file your return by that time.
In addition to your personal tax return, if you have a corporation, you likely have to file a T2 corporate income tax return. It’s on this return that you declare the income, expenses and financial position of the corporation. Your corporate filing deadline is completely separate from your personal filing deadline. Generally speaking, corporations have 6 months to file a T2 corporate income tax return from their year-end date. However, you actually owe your corporate tax balance sooner.
When do you really need to pay your taxes?
For most small corporations, you’ll need to pay your tax balance 3 months after your year-end date. As it’s not always easy to get your records together by then, you may want to pay an estimate of your taxes owing to avoid interest costs altogether. If your overestimate your taxes, not to worry, you’ll get the balance refunded once you file your return.
For larger corporations over the small business deduction limit or ones that don’t meet the CCPC rules, you may have to pay your balance 2 months after your year-end date. As the criteria for a two month deadline are a little complex, you may want to check with your accountant to determine which category you fall into.
As if corporate and personal income taxes weren’t enough, there may be additional taxes that should be on your radar.
If you’re registered for GST/HST, your filing deadline will depend on your filing frequency. If you’re an annual filer, you may have to both file and pay your taxes 3 months from the period end. If you’re a monthly or quarterly file, you generally have until the end of the following month. Remember to check your due date online or on the tax return itself to ensure you get it in on time.
If you make payroll deductions, these must generally be filed and paid by the 15th of the following month.
If you own a corporation with sales tax and payroll, it can certainly be overwhelming to keep track of all your deadlines. However, with a little planning ahead and clearly marking your deadlines on a calendar, you should be able to stay on track and keep your hard earned dollars from funding any interest and penalties!