What Happens if Your Company Misses the Income Tax Deadline?

Missing the Corporate Tax Deadline

Nearly everyone, both individuals and corporations, needs to file income taxes. It is important that you are aware of the process for filing corporate taxes and that you do so by the deadline. Otherwise, it could be very costly for your business.

When to File Corporate Income Taxes

Corporations in Canada are required to file annual returns whether they are active or inactive. The only way to avoid this is to dissolve the corporation.

You’ll need to file your corporate tax return no later than six months after the end of your tax year, which is the end of your corporation’s fiscal period. If your corporation’s year ends on the last day of a month, you must file by the last day of the sixth month after the end of that tax year. If your year-end is on another day of the month, you must file your return by the same day of the month after the end of your fiscal year. For instance, if your tax year ends September 15th, your tax filing is due by March 15th.

If your deadline falls on a Saturday, Sunday or public holiday, your return will be considered on time if you file on the first business day following the deadline.

While the deadline for filing tax returns is six months after your corporation’s year end, any taxes owed must be paid within two months of the fiscal year end. You have three months to pay if the corporation is a Canadian-controlled private corporation (CCPC) or if your corporation claimed the small business deduction in the current or previous tax year. This situation only applies if the taxable income for the previous tax year does not exceed its business limit for that tax year or if the total taxable incomes of all associated corporations for their last tax year does not exceed the total of their business limits for those tax years.

What Happens When You File

Once you file, the Canada Revenue Agency (CRA) will process your return and send you a Notice of Assessment. If this notice shows that you have a balance owing, it is in your best interest to pay this amount immediately. If you cannot pay, the CRA charges daily compound interest on the unpaid amount owing, starting on the annual filing deadline.

What Happens if You Do Not File Corporate Income Taxes on Time

Even if you are not able to pay the full amount of tax owing, it is still important that you file your tax return on time. This is because the CRA charges a late filing penalty for returns that are not filed by the deadline.

The penalty charged by the CRA will be 5% of the balance owing plus 1% of the balance owing for each month the return is late, up to a maximum of 12 months. If you have been charged a late filing penalty in the previous three tax years, you could be charged 10% of the balance owing plus 2% each month up to a maximum of 20 months.

Sorting Our Corporate Taxes

Proper planning is crucial to avoid situations where you are unable to file or pay your income taxes on time.

In addition to our tax preparation services, the professionals at Ralevic & Ralevic LLP can provide tax minimization and tax deferral optimization strategies that help your organization plan for income taxes. We can also help you create a tax optimization and tax planning strategy, so you are prepared to pay your taxes and have the funds available to do so on time. For more information, please contact us today.

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