The CRA has a whole assortment of tax filing deadlines and penalties, some of which are more severe than others depending on the particular circumstances. For example, personal tax returns must be filed by April 30 of the year following the calendar year in question, and the penalty for late filing is 5% of the outstanding tax payable, plus 1% for each additional month up to a maximum of 12 months. Therefore if an individual owes tax of $15,000, the penalty is much more severe than if he only owed $100. Furthermore, if the individual expects a refund, there is no penalty for late filing because there is no tax owing. A "second occurrence" penalty of double the regular penalty can be assessed if a similar late filing has occurred in any of the three preceding years. There are some exceptions to the April 30 filing due date, most notably when the taxpayer or the spouse of the taxpayer carried on a self-employed business- in which case the filing deadline is extended to June 15.

For corporations, the filing due date is 6 months after the fiscal year-end of the corporation. Late filing penalty is the same as described above. Depending on the type of company, any tax owing is due either 2 or 3 months following the year-end even though the tax return may be filed afterwards. Payment of the tax later than the prescribed deadline will result in interest charges but not penalty.

For both individuals and corporations, instalment payments of tax are required during the taxation year, which should minimize the balance of tax owing at time of tax return filing. The method of calculation of instalments would require an in-depth discussion, but suffice it to say that individuals need only pay instalments when their tax deductions from employment and other income requiring tax withholding still resulted in tax owing of more than $3,000 in the prior year. The same threshold applies to corporations. Non-payment of required instalments results in interest charges of 2 percentage points over the 90-day government treasury bills rate, plus a penalty of 50% of the interest less $1,000.

There are many other tax implications of associated corporations in Canada. Please contact Simkover and Associates at 905-943-4046 if you need further accounting services or advice in relation to this topic.Click here for additional contact information