9.4.3 Penalties and audits
COVID-19: Changes to taxes and benefits
Find out about Canada Revenue Agency’s new benefits and other changes that support Canadians during the COVID-19 pandemic.
Taxes in Canada are due on April 30 every year. You must file a completed tax return together with any taxes due for the previous year.
You are not required to file a tax return if you don't owe any tax, but if you don't file you can't claim any refund that may be due to you. You will also miss out on potential benefits and tax opportunities, such as the ability to claim a sales tax refund and to find out your contribution room for registered tax plans.
There are penalties for filing late, as well as interest on any unpaid taxes. A late filing is assessed five percent of any unpaid tax, plus interest of one percent per month for for a maximum of 12 months. Penalties become much more severe if you are found guilty of willful tax evasion.
The Canada Revenue Agency (CRA) can audit your records to check that your return is backed up by documents. If you cannot show valid documents, auditors can make their own estimate of your income and deductions. You have a right to challenge their estimate, but without documents it's difficult to show a more accurate statement. The best way to avoid an auditor's estimate is to make sure your records are complete and accessible. (The filing system described under Getting organized will ensure that you have your records available.)
Balancing the powers and authority of the tax collections agencies are taxpayer rights and the provisions for taxpayer relief.
For taxpayer relief, you can ask the Agence du revenu du Québec (ARQ) or the CRA to cancel penalties or interest if you failed to file your return correctly because of reasons beyond your control, such as a death in the family or serious illness. You can also ask for relief if the tax agency made errors or failed to inform you of an issue within a reasonable time.
You can also ask for an extension to request a refund that you missed, and you can ask the tax agency to reassess your file for earlier errors or omissions. However, it's always best to file your return on time even if it is not complete. You can file a correction later if necessary.
The federal Taxpayer Bill of Rights states that you have a right to fair, courteous and honest treatment by the CRA. The Taxpayer rights and obligations of the ARQ makes similar commitments to taxpayers. You can read about these rights in the section titled Taxation rights and responsibilities.
You can revise your tax returns for the past 10 years to claim refunds that you overlooked or recalculated. But a revision could also result in scrutiny of your file by tax auditors, who may ask for a correction of errors in their favour.
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