penalties for not filing tax returns?

[Andit]

A dear friend of mine has been going through a lot in life (quit work to be a caregiver to an elderly disabled parent, dealing with a few health issues and some recent deaths in the family). Needless to say, filing taxes was not high priority. And D didn't think it was necessary, given that they are living on savings. At any rate, I recently found out that D hasn't filed in several years (D thinks 9 but can't be sure) and is terrified of having to face huge penalties or worse jail time for not filing.

So, now that I know, I'm trying to sort things out. Does anyone have experience with this? I'm trying to figure out how to unravel this. Do I just file a tax return for D for this year with a note explaining circumstances and lack of income?

Thanks for any advice.

[sweet sparrow]

Nine years is a pretty long time not to have filed taxes. I'd call the 1-800 number for the CRA and ask how the best way to handle it would be (if they want a letter or something else).

[lecale]

.

[gwennad]

If there were no taxes owed, and they did not receive a request or demand to file a return, they do not need to file for the missing years, however they may have been entitlted to credits that they are missing out on and may wish to file.

If they do owe for any of the years in question they should file under voluntary disclosure, all at once, there is information on the CRA website. This will alleviate any penalties (though not the taxes owed).

Calling the 1-800 number would get them more information, and they can also send the forms needed if they decide to file for the prior years. CRA would also be able to say when he last return was received and assessed.

[momof5boys]

It may be worth your while to go through an accountant, especially if there are rebates owing as well. I think the CRA is less likely to nit pick if they see a tax return done by a professional....

[Zonny]

When my mom fell last year and was on a list for a nursing home, they needed proof of her income. This was when I realized she hadn't filed her taxes in several years. I had my accounting cousin do it, she ended up not owing anything. One factor for that was that she was owed GST for those years. She didn't get much of a refund either, but it was good to have it done! Which reminds me, I've got to get hers done again.

[brunt]

Disclaimer: I am not a tax professional, but am really into taxes.

As has been mentioned above, if no tax was payable, then they didn't even have to file.

As a rule of thumb, if under 65, you start paying taxes if your income was over about $11,000. If over 65, you don't start paying until you are over about $18,000. Please note that these numbers are just starting points, and are subject to change depending on marital status, minor children, and even caregiver's credits. Additionally, if they had deductions taken at source, that may even have more than covered taxes owing.

I would highly recommend them to file, for two reasons:

Reason 1: If you come forward owing taxes, CRA is generally pretty forgiving. They have to be, or people won't come clean. You will still have to pay owed taxes plus interest and fines, but the odds of charges are pretty minimal.

Reason 2: Many credits such as the GST credit, provincial credits or GIS are based on your income on your filed taxes. If you don't file, you don't get them. By not filing, you could actually be costing yourself money.

Without further information, it is impossible to say which way things would go (owe money or get refund). I would suggest that your friend see an accountant ASAP to get matters cleared up.

[brunt]

One other commonly misunderstood point. It is not against the law to not file your taxes. It is against the law not to claim all of your income on which taxes would be payable. Huge difference. You don't owe taxes, you don't have to file.

But I must reiterate that your friend is probably missing out on (potentially sizable) credits if their income is low.

[cdngal75]

I would encourage your friend to initiate a visit with the CRA soon. You do not want them coming after you. There was a fifth estate episode with a few horror (and that is an understatement) stories of people who the CRA went after.

I assume your friend has not been living solely off savings for the last 9 years.

[Pat Drummond]

+1 on Brunt's reply. Technically you don't really need to file your taxes. Now if you are evading paying taxes by not filing, than that's a big issue. We file taxes because

1. We paid too much taxes and we want to get a refund. If you don't file, you don't get a refund
2. We want to report our income. It shows up on our records and can make it easier when applying for loans, applying for permanent residence, applying for social assistance, pension etc etc.

[Andit]

Thank you, everyone, for the replies. Greatly appreciated.

I talked to the folks at Rev Can and am well on the way to straightening things out. Here's hoping it's quick and painless.

I'll let everyone know what happens.

Thanks again.

[FallenPixels]

They would have likely garnisheed his bank account well before now if they were that worried about it. We had an employee who had a tax garnishee on his wages, he left and then came back claiming we accessed his bank account to get the money back. Turns out they took everything in his account (and the new employers cheque he deposited) and the letter from them arrived about a week after they did it.

[Ciel]

I have noticed that Notice of Assessment letters arrive about 1 week after the date printed on them.

Re: tax garnishee-that's a harsh way to find one's earnings gone unless the employee avoided working out a payment schedule or did not contest an outcome using a lawyer. No money in the account means no rent or utility funds!

[Ciel]

Andit, it's great that you are leading your friend through the process of catching up on her filings. Hope your friend has sorted out any medical receipts (there have been changes over that 9 year period for eligible amounts in terms of what additions to the list were made) that might be eligible for non-refundable tax credits. If the bulk of receipts fall over certain months, claim year can be say May 1 of preceeding year to May 1 of tax year. Just cannot claim May 1 tax year date again in the following income tax return year.

[Shirnette]

I haven't filed in 2 yrs but don't think I'll owe govt(nvr owed in past).Have new baby so need to get $ govt hopefully owes me/us.Will file going forward.