Dear Expert:
I recently received my notice of assessment from the tax department. I am expecting a small refund, due mostly to a $12,000 RRSP contribution but offset by tax payable on some freelance income, and did not get around to filing my tax return until late May. The assessment asked me for supporting documents for about $1,200 in charitable donations and some freelance consulting income (less than $10,000) for which I do not have T4 slips but rather just receipts from my contractees. My employment income from a fulltime job is about $70,000. What happens if for some reason the CCRA decides that I owe them taxes for 2002. Will I be forced to pay a late-filing penalty and interest on the unpaid amount? Expert answer:
Because you reported income from self-employment in 2002 (i.e. freelance consulting), you may actually be in luck. For most taxpayers, the tax deadline for filing the 2002 tax return and for paying any balance due was April 30, 2003. However, if you were self-employed (i.e. carried on a business) in 2002, then you had until June 16, 2003 (since June 15 fell on a Sunday this year) to file your return. That being said, whether you are self-employed or not, the balance due-date for paying any taxes owing for 2002 was still April 30, 2003.
Since you filed your tax return in May 2003, which was before the June 16 deadline, then you should not face the late-filing penalty (5% of the balance due plus 1% per month for each month not filed). Still, you will be charged arrears interest at the prescribed rate plus 4% on any balance owing from April 30 until the time that you actually make the required payment to the Canada Customs and Revenue Agency.
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No statement in this article should be construed as a recommendation to buy or sell securities or to provide investment advice or individual financial planning. Morningstar Canada does not provide specific portfolio advice and recommends the use of a qualified financial planner when appropriate.
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