With the Canada tax deadline being in the first quarter of the year for many tax payers, they don’t start thinking about their current tax year situation at least until after they have filed the last year’s. That means that four months of the year have past and no tax planning has been implemented. When some thought is given to the current year a lot of people figure it’s too late to change anything that would provide any type of tax benefit so they just continue on the way they have been.
It really isn’t too late to put some tax strategies into place because each month where you can make your tax obligation a little easier is worth some effort.
One of the biggest pitfalls that many people fall into at tax time is discovering that they owe the tax department some money which they just don’t have at the time of filing. So they either simply don’t file, hoping that maybe they will have some extra cash the next month, or they do file but forget about paying the amount owed. Filing whether you have the money to pay the tax bill or not is important, because at least then you are avoiding the late filing penalties which will increase interest owed on the unpaid amount.
Don’t ignore your income tax bill because it will constantly increase due to interest charges, which are not cheap. You can call the CRA and make arrangements to pay the bill in instalments in most cases. Most likely the interest will still accumulate on the unpaid amount, but everyone’s circumstances are different and the tax department will take this into account.
What is just as important is to try and determine what led to the situation where you had to pay extra taxes. It is much better when you can file your taxes each year without having to attach a cheque to it. It could be that you had some investments that changed your tax status, or it may be that proper tax deductions are not being taken at the source, which would be your employer. In this case you can review this with them and ask them to increase the amount they are withholding.
You can also utilize the services of a Toronto accountant who can help you determine a better approach to your tax situation.
