If you haven’t filed taxes in years, you may be wondering how many years you can file back taxes for in Canada. Though the majority of Canadians must file tax returns each year, there are several reasons someone might fall behind, such as:
- Believing you won’t owe taxes, so you don’t file
- Incorrectly assuming you won’t have to pay if you do not file
- Knowing you will owe taxes, but you don’t have the funds to cover the liability
- Finding back tax filing too stressful and overwhelming, so you continue putting it off
- Losing records or receipts and you don’t know how to file back taxes without records
Unfortunately, if you haven’t filed taxes in five years, the problem isn’t going to go away. However, the process of addressing your tax liability doesn’t have to be stressful or overwhelming. If you’re looking for help filing past tax returns in Canada, CPA4IT is here for you.
What Happens If You Don’t File Your Taxes in Canada?
While it is not a crime to owe taxes, it is illegal to ignore the need to file a tax return if you meet the requirements to do so. Since most Canadians must file income taxes each year, you likely need to file a return, and failing to do so could mean you are committing a crime known as tax evasion.
Tax evasion refers to a business or individual intentionally ignoring the tax law and not filing taxes by the due date. You could face several penalties if you commit tax evasion, such as:
- Fines imposed by the court
- Prison time
- Criminal record
Even if the Canada Revenue Agency does not pursue tax evasion charges, failing to file your returns can still come back to hurt you. You may face a considerable late-filing penalty and accrue interest charges on your tax liability. The longer you wait to file your back taxes, the more the interest and penalties may snowball, meaning the strain on your budget could become significant if you put off filing year after year.
If you cannot pay your tax debt, filing on time can still spare you from penalties. Some people believe that if they avoid filing their tax returns, the CRA won’t be aware. However, the CRA is a large, powerful organization and will eventually uncover the issue. If you do not file your taxes, the CRA may turn it over for collection.
When you don’t file your tax return, the CRA may do an arbitrary or notional assessment to estimate your income and expenses, which they can then use to calculate how much you owe in taxes. While completing an assessment, the CRA will examine the information available and make assumptions about your situation, so the estimated tax debt may be much higher than what you would’ve initially owed.
How Far Back Can You File Taxes in Canada?
Remember to file your taxes each year, even when you don’t owe money. Not filing could mean you forgo many benefits you are otherwise entitled to receive, like the Canada Child Benefit. Fortunately, if you have ignored your taxes in the past, you can file taxes for multiple years in Canada.
You have 10 years to file an income tax return in Canada. Before this 10-year deadline, you can request relief from the CRA to:
- Issue an adjustment or refund beyond the standard 10-year period
- Accept a late or amended income tax election
- Waive or cancel penalties
If you have owed back taxes for more than a decade, the agency cannot offer you relief. For example, if you submit a request in 2022, the issue must pertain to the 2012 tax year or later. Requests or returns related to the 2011 tax year or previous years will not be eligible for consideration. This limitation period of 10 years rolls forward on Jan. 1.
Whether you haven’t filed taxes in a year, five years or 10, you should know how to file past years’ taxes and do so immediately.
What You Can Do About Back Taxes
If you owe back taxes, a few options may be available to help you file your taxes and pay your debt.
1. Use the Voluntary Disclosure Program
When you haven’t filed your taxes in a few years, you can turn to the CRA’s voluntary disclosure program, which allows you to file your tax returns or change information on a filed return.
However, the voluntary disclosure program is available only for people who are proactive about dealing with their back taxes. Once the CRA contacts you to request that you pay your debt or file your taxes, you become ineligible to use this program.
2. Request Penalty and Fee Waivers
In some cases, you may owe the CRA more than you can afford to pay back. If you have dealt with extreme financial distress, the death or severe illness of a family member or a natural disaster, you can apply to have your penalties and fees waived.
Keep in mind that you will need to prove why you couldn’t pay or file your taxes on time. This option isn’t available for everyone and doesn’t reduce the total amount owed.
3. Work With the Professionals at CPA4IT
At CPA4IT, we understand how to file previous years’ taxes. We can advise you on the best way to proceed, and with more than a century of combined experience in assisting small businesses with managing their finances, we can help you generate success.
We will keep thorough records of legal documents, past tax returns and vital documents like balance sheets and income statements. We maintain a secure file digital vault where we store everything we handle for your business. Our team of experienced professionals knows that tax laws change frequently, so we stay current via the world’s largest accounting conferences to ensure your business follows regulations.
Filing Multi-Year Tax Returns in Canada
At CPA4IT, we prepare and file corporate tax returns. Our services can provide as much or as little support as you need to organize your financial information, prepare your corporate financial statements and file your tax returns accurately and on time.
When you choose to work with us at CPA4IT, we provide financial peace of mind by helping you maximize the benefits of filing a corporate tax return, decreasing your stress and increasing your net worth! The longer you wait to file taxes, the trickier your situation will become. Contact us at CPA4IT to help get your multi-year taxes situated.