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Letter: Why file your income tax?

In summary, always, always file on time.

Why file your income tax?

Easy answer. Not doing so is financially foolish for many reasons.

Here are some of the reasons.

If you are at low income, a lot of your benefits like social assistance, GST rebate, etc, even OAS are based on income. So if you do not file your return, those benefits may stop. Some as early as August if you did not file on the usual due date, May 1, a bit of a shock.

If you are at higher income and actually pay tax (don’t confuse this with getting a refund), filing is even more important. When preparing your tax return, it may end up that you still owe some tax or more likely you are getting a refund. A refund because your tax payable is less than the amount prepaid during the tax year.

If you owe tax money and do not file on time, there is an immediate penalty. If you file on time but owe money and cannot pay, yes you will start paying interest after the due date but it is at a far better rate, currently about 6% I believe, than the horrible rate 20+ % that credit cards charge on outstanding balances. Of course, you also pay interest on the penalty amount. If you think you owe money by the due date and hope that by not filing they won’t catch on to you, think again. I call that the ostrich approach, putting your head in the sand so they won’t see you. Well, CRA is even more persistent than the hyenas or lions happily chewing on the ostriches, and you will still pay interest and penalty back to the due date.

If you have a refund coming, guess what, you do not get it until you ask for it by filing. And you do not get interest even if you delay filing for years. So delaying filing means you are lending the feds your money at 0% interest. They probably love you to do that, though I do not believe they ever send out thank you letters.

In summary, always, always file on time.

As a volunteer, we have filed hundreds of returns each year. Most on time of course, but the occasional ones overdue by years. Some of those had refunds coming of several thousand dollars. Some owed, and with the penalties and interest, the amount owed had doubled.

How to file a tax return? Is it so difficult? I'd advise against trying to do it yourself with the old pen and paper and calculator method. You most likely will end up with a less favourable result and waste money. There are lots of commercial outfits that will happily charge you and do a good and quick job of filing for you.

There are also cheaper ways. If you or a friend have some PC computer skills, there are computer programs that are easy to use and will cost you very little. I personally use the UFILE program, finding it easy, very correct, and best value.

If you are relatively low income, under $35000 total income for a single person, a bit more for a couple or with dependents, you may be able to get it done at no cost by volunteers at FCSS.

Jerry Koenderink