Are you behind on your taxes? Do you have returns that have not been filed on time? It is normal to feel stressed out and overwhelmed. No matter the position that you find yourself in, the good news is that there are always options available. As frightening as it can be to owe money to the Canada Revenue Agency (CRA), bad taxes (including missed returns) are merely a problem to be solved. At Padgett, we are leaders in tax advisory services, including helping people and small business owners catch up on late payments and missed returns. Here, our advisory team provides a comprehensive guide to how to handle late or missed returns.
Behind on Taxes? How to File Multiple Years at Once
Taxpayers fall behind on their returns. It happens in Ontario, it happens in British Columbia, it happens in Quebec, and it happens everywhere else in Canada. When a taxpayer falls behind, they often do so for more than one year. Life events, business pressures, or other forms of financial stress can lead to several years of unfiled tax returns. While it may feel daunting, the CRA allows individuals and businesses to file multiple years at once. The process starts with gathering all necessary documentation (T4 slips, bank records, investment income statements, business receipts, etc) for each unfiled year. You need to get your paperwork together before you can file.
Filing all outstanding years together shows the CRA that you are taking proactive steps to get compliant. In many cases, penalties and interest can still apply, but filing voluntarily reduces the risk of enforcement action. You can usually avoid things like wage garnishment, asset freeze, or more formal and aggressive collection proceedings. For small business owners, catching up on GST/HST returns at the same time is essential to avoid additional assessments. By submitting everything in one package, you will be in the best possible position to catch up.
Note: In some cases, a taxpayer who steps up and voluntarily files all of their late returns can have penalties waived and up to 75% of interest waived. .
CRA Voluntary Disclosure Program: A Lifeline for Late Filers
The Voluntary Disclosure Program (VDP) is a powerful tool for taxpayers who are late or have made mistakes on prior returns. Through this program, the CRA gives people (and small businesses) the opportunity to come forward on their own before being contacted by the agency. If the multiple tax returns are accepted, the CRA can waive penalties and reduce interest. There are some cases in which the actual amount of taxes owed could potentially be reduced. Though, that is generally only a limited remedy for taxpayers who have genuine financial distress.
It is important to emphasize that eligibility for the VDP requires that disclosures be fully voluntary, complete, and that they involve information for at least one year that is past due. For example, a taxpayer who failed to report foreign income, or a small business owner who neglected to remit HST, may apply under the VDP. Timing matters: Once the CRA initiates an audit or enforcement action, the taxpayer loses the ability to make a voluntary disclosure.
The Real Cost of Ignoring Your Tax Returns
If you are behind on filing your tax returns, it is imperative that you take action as soon as you possibly can. The problem is not going to go away on its own. Even if you have not heard anything from the CRA yet, that does not mean that you fell through the cracks. Failing to file taxes is not a problem that disappears with time. On the contrary, the CRA has broad powers to enforce compliance: The longer you wait, the more severe the consequences become. Here is an overview of some of the costs of ignoring your tax returns:
Penalties and Interest: Late filing penalties start at 5% of the balance owing, plus 1% for each additional month, up to 12 months. Repeat late filers can face even higher penalties. Interest compounds daily on both the unpaid balance and penalties.
CRA Arbitrary Assessments: If you fail to file, the CRA can issue a “notional” assessment based on its own estimates. These are often much higher than what you actually owe and can be very difficult to challenge without catching up on filings.
Harsh and Immediate Enforcement Action: Finally, the CRA has strong collection powers, including garnishing wages, freezing bank accounts, and placing liens on property. These steps can severely disrupt personal and business finances.
Top Tips for Getting Back on Track After Years of Unfiled Taxes
Catching up may feel overwhelming, but breaking it down into steps makes the process manageable. Here are practical tips to regain control of your finances in Canada:
Gather Your Records: Start by collecting T4 slips, investment statements, receipts, and notices of assessment for each unfiled year.
File the Earliest Years First: The CRA usually requires the oldest unfiled year to be submitted first. Doing so creates a chronological record and avoids complications.
Seek Professional Tax Help: A tax professional can prepare multiple years efficiently, identify deductions you may have missed, and help you explore options like the VDP.
How Padgett Can Help You Catch Up On Late and Missed Tax Returns
There are few things more stressful or frustrating than dealing with a late and/or missing tax return. A proactive approach is always best. No matter the specific situation that you find yourself in, the right time to move forward is now. At Padgett, we help individuals and small businesses resolve the full range of tax problems. Along with other things, our tax consultants are here to help you catch up on missed/late returns. You do not have to navigate Canada’s process for resolving back due taxes on your own. We are here to help protect your financial interests.
Contact Our Tax Advisory Team for a Fully Confidential Consultation
At Padgett, we are proud to be a leader in tax advisory. If you have any specific questions or concerns about how to catch up on a late payment or a missed return, we are here to help. Give us a call now or contact us online to find the nearest accountant near you and arrange your completely confidential, no obligation initial consultation. We provide tax advisory services throughout Canada.