Canada Tax Deadline 2021: Here are Important Facts you should know

Canada tax deadline 2021

What’s Canada tax deadline 2021? 

Will 2021 tax deadline be extended?

Must I file taxes by April 15th? 

These are some of the common questions regarding income tax filing and payment deadlines for trusts, charities, individuals, and corporations. This article focuses on important tax filing deadlines and any other important tax payment deadline update.  

The 2021 tax filing season kicked off on February 22nd, 2021, and Canadian taxpayers are expected to file their tax returns by April 30th, 2021. For a self-employed individual or those with a partner/spouse who is self-employed, the tax deadline extends until June 15th, 2021. 

Will CRA extend the tax filing period?

2020 was a tumultuous year given the COVID-19 pandemic that ranged nearly every nation worldwide. This created economic turbulence that pushed the CRA to extend the income tax filing deadline for individuals from April 30th to June 1st 2020. Canadian taxpayers were also given penalty-free until September 30th, 2020, to pay the taxes they owed.  

It’s unclear if CRA will grant similar extensions during the 2021 tax season or period. As far as we know, you’re supposed to file your income tax returns by April 30th. Just get the relevant tax forms and file your individual income tax before the deadline to avoid a penalty. Note that late income tax filing could negatively affect your government benefits. For instance, you might miss out on the HST/HAST Credit or Canada Child Benefit. 

Penalty for late tax-filing 2021

Canada Tax Deadline 2021

The federal government wants every dollar it is owed and needs it on time. That means there is a penalty for filing your income tax return late, particularly if you have unpaid income tax debt. However, if your tax balance is zero or getting a refund, there’s no late filing penalty or fees for sending in your income tax return after the due date. 

Here are the penalties for filing your benefit returns and tax return late when you owe CRA. 

1. Late tax-filing penalty 

You face an immediate penalty of 5 percent on the amount of tax balance owing and 1 percent of the amount of balance owing per month for a period of 12 months. Suppose you owe CRA $5,000 in taxes and send in your return 12 months late, the tax bill is likely to increase to $5,850. Here’s how. 

$5,000 X 5 (percent) = $250 

Plus 

$5,000 X 1 (percent) X 12 months = $600

The total late-filing penal is $850, raising your total tax bill to $5,850. 

Note that this amount doesn’t include the interest penalty. Suppose you were late handling your tax affairs in the previous tax year. The CRA is likely to increase your late filing penalty by 10 percent of your balance and 2 percent monthly up to a period of 20 months. 

2. Late tax-filing interest

The government may also charge interest on the taxes and penalties you owe. There are situations where the CRA may waive interest/penalties on the amount of taxes owing if you can prove that a situation beyond your control prevented you from meeting your tax-related obligations. Such circumstances include postal strikes, financial challenges, and disasters such as accidents or illness. 

Even if you’re unable to pay the taxes you owe, it makes sense to file taxes before the due date. Doing this means you won’t pay the late-filing fees and will be on the hook only for interest payments. 

Is tax filing compulsory in Canada?

It depends on several factors. 

If you do not owe taxes to the federal government, you don’t need to file returns. But there are other reasons you must file returns. These include; 

  • You’re expecting a refund. CRA will not chase you around unless you owe them, which is why you better go get your refund. 
  • You’re eligible for government benefits such as allowance GIS benefits, GST/HST credits, or Canada Child Benefits. 
  • You are already contributing to the CPP (Canada Pension Plan). 
  • You have an open lifelong learning plan or home buyer’s plan account via RRSP. 

There may be other scenarios when tax filing is necessary, even when you don’t owe any taxes to the federal government. Whenever in doubt, consult with a tax agency like PersonalBanker to help you figure out your personal income tax, tax credits you may be eligible for, benefit payments, and other aspects of your tax obligations. 

How to file taxes 

Canada Tax Deadline 2021

There are many ways people can go about filing their taxes, depending on their preferences and circumstances. Here are some of the payment options or filing options. 

1. Online tax software 

Currently, there are various brands of online tax software you can choose from. Depending on the kind of support you require, you can choose paid or free versions. TurboTax Canada is one of such tools you can use to figure out your taxable income, business income subject to taxes, income tax debt, and ultimately file your taxes. 

2. File paper returns through mail 

Some people choose to do their taxes the traditional way. The CRA sometimes mails out income tax forms to any taxpayer who prefers handling paperwork. In case you didn’t receive the relevant forms, you can download or order a paper copy. Remember, you may need to wait for eight weeks if you are expecting a tax refund. 

3. File My Return (CRA)

For the 2021 tax season, the Canada Revenue Authority is helping low-income individuals and self-employed people to complete their tax returns through automated phone service. Note that this service is free, and any eligible taxpayer will receive an email notification.  

4. Volunteer income tax program

During the tax filing, this program helps people with simple taxes and modest income to complete their file their returns. In 2021, such help will be provided via document drop-off arrangements, video-conferencing, or phone. 

You are probably wading your tax records trying to file your returns to avoid late-filing penalties. But it is a daunting task, particularly if you are an employer tasked with withholding taxes for employees or addressing the tax obligations of a corporation. 

In this case, you need tax preparers who can successfully figure out self-employed business income that’s subject to taxes, any eligible tax deduction, regular benefits, and file corporate tax returns before tax payment deadlines. The tax preparers at PersonalBanker can also help understand how mortgage payments and other installment payments affect your taxable income during the tax filing season. 

Personal income tax changes – 2021 

The coronavirus pandemic changed many aspects of our lives, including income and taxes. Unlike the years where you probably focused on acquiring the T4 slip, this time, things are slightly different. In Canada, people who received COVID-19 income support or any other finance-related COVID benefit are legally required to report that income. Suppose you received Canada Recovery Benefit (CRB), you will get T4A slip from the CRA. 

The following updates are applicable to the 2021 tax year. 

RRSP Contribution Limit: 2021 RRSP annual limit has increase from $27,230 (in 2020) to $27,830 (in 2021). Note that you would have made RRSP contributions for the 2020 tax year during RRSP time that ended on March 1st 2021. 

TFSA Contribution Limit: 2021 yearly TFSA limit remains unchanged. So, if you’ve been eligible to contribute to TFSA since its inception in 2009, the total of your current contributions is $75,000 if you didn’t make withdrawals. 

Basic Personal Amount: The 2021 federal basic personal amount (highest) is $13,808 if you earn $151,978 or less. Note that a clawback of that personal income amount applies to a higher taxable income and is approximately $12,421 for those who earn $216,511 or higher. 

Home office expense deductions: Supposed you have been working from your home office due to the impact of COVID-19. In that case, the CRA allows to claim up to $400 (home office expenses deductions) without submitting the T2200 Form. Remember, when you were setting up the office, you must have incurred expenses that you wouldn’t have if you were working from your employer’s office (workplace). 

Other important updates that you must know include federal taxes updates, provincial tax rates, and more. It’s also essential to learn more about the new/improved tax credits such as medical expense tax credit, Canada caregiver amount, and disability tax credit. Most aspects of taxes are complicated, which is why you should work with the tax experts at PersonalBanker to figure out your personal income tax or corporation tax situation. 

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