Guest blogger Leanne Salyzyn is an insolvency counselor, licensed restructuring professional and trustee in bankruptcy. Post a comment or contact her on Twitter with your …
The Tax Man ComethBy Trevor J. Adams | Apr 24, 2012
Tags: debt, Leanne Salyzyn, money management, personal finances, taxes
Although there is only a week to go before the 2011 income-tax filing deadline, there are still people who have yet to file their taxes for 2010 or even prior years. This may seem strange to those that regularly file. Most people understand their responsibility to file and reap the benefits of filing in the form of income-tax refunds or credits such as Child Tax Benefits or GST.
Sill however, there are those gripped in fear of filing because they know they paid an insufficient amount of income tax throughout the year and will owe once they file. So, instead of dealing with the issue head on, they avoid filing in the hopes they will fly under the radar long enough to perhaps gather the money to eventually pay the arrears. Some fail to file because although they may be great in their craft/trade, they are terrible accountants or bookkeepers. Excuses range from “being too busy to file” to “cannot afford to pay someone to prepare the return.” The end result remains the same. Time passes and the return doesn’t get filed until, in many cases, the Canada Revenue Agency, catches up with them.
I have a cartoon in my office of two castaways on a desert island looking very ragged and forlorn. One man asks “do you think they’ll find us?” The other says “don’t worry, I owe Canada Revenue.” No matter how many times I read it, the message still rings true. You can only hide for so long.
Although it’s never too late to clean it up, it’s best to stay on top of filing the returns from year to year to avoid unnecessary penalties, interest and judgments by the Canada Revenue Agency. It is imperative to recognize throughout the year if insufficient income tax is being deducted at source. Many people think their tax situation remains static from year to year even though their personal situation may change. Recognizing how changes impact taxes is key to avoiding a future tax problem. Dual sources of income, such as a full time job and an additional part time job, may bump you into another tax bracket causing an income tax debt at years end. Investments surrendered during the year might be considered taxable income and as often they have only a minimal amount of income tax withheld at source. Self-employed persons such as sub-trades are responsible for their own income tax installments which all too often get missed due to fluctuating income.
Avoidance can only continue for so long. Eventually the ostrich must lift his head out of the sand. Reduce stress and view filing taxes a matter of “spring” financial cleaning. Gather all tax documents and organize them into two piles: an income pile and a tax deduction pile. Schedule time in your busy life to fill out the necessary tax forms and either paper file or net file. If you are feeling overwhelmed with the task at hand, enlist the help of others, such as a tax preparer or accountant. The end result will be a decluttered financial closet. Ignorance may be bliss but knowing where you stand with the tax man is always better than not knowing.