That’s important in an increasingly digital world. Hard copy does matter. For example, if you’ve closed bank accounts, says Wall, you may not be able to get the statements you need to file past years’ tax returns, especially if you don’t have the receipts or invoices.
If you just have a T4 and no claims for discretionary expenses like childcare, medical, moving expenses, donations or tuition fees, your documentation requirements will be simpler, but if you have those expenses to claim, you’ll need some kind of documented proof.
This is important because the CRA says all documents must be legible and reproducible. Wall says in some cases the documents, like medical expenses or receipts for a small business, don’t have to be original copies. It can be a scan—CRA is increasingly asking for electronic receipts. However, credit card or bank statements are not valid for these claims—you need to keep the receipts.
“You can go ahead and file a return and if you’re never audited, you might be fine,” he says. “But if you file the return and it gets audited, and you can’t produce the receipts, then they will deny those expenses, and could turn a refund into a balance due.” He says that usually, when someone is filing multiple years that are late, your probability of getting audited increases, especially if you’re self-employed. Filing late in those cases will attract those late filing and potentially gross negligence penalties to add to the tax burden.
Can you avoid interest on tax returns owed for multiple years?
Penalties and interest happen when you file late and owe the government money. They can also happen after an audit, when CRA disagrees with your claims.
In some cases, it is possible to plead “hardship” under the Taxpayer Relief Program. For example, if an extraordinary circumstance caused you to miss filing a return, such as a death in the family, serious illness or other serious circumstance. Certain delays in resolving an audit or incorrect information provided by the CRA may have caused you to be unable to fulfill your obligations, and you can apply for relief in those cases too. File the Form RC4288, Request for Taxpayer Relief Cancel or Waive Penalties and Interest to request relief. Sometimes financial hardship can be used as a reason for a relief request, but detailed records must be submitted.
But if you want to get prosecution relief, possible penalty relief and partial interest relief, you can take advantage of the Voluntary Disclosure Program. You have to voluntarily come forward to fix any mistakes in your tax filings before the CRA knows or contacts you about it. The program is open to any taxpayer, from individuals, employers, and corporations to partnerships and trusts.
You will have to pay the taxes owed plus either the full or partial interest, but you may receive some form of relief, based on the discretion of the CRA.
Save – MoneySense. (2023-12-20 16:27:25). www.moneysense.ca
