Due dates, deferrals and deadlines! Oh my!!!

Summarizing the information that you need to keep up with tax filing timelines for the year - and helping you understand the interest relief provisions announced for eligible taxpayers for any balance owing on their 2020 tax return

Once the end of February arrives with its T4 deadline, the due dates seem to fly fast and furious.  And I know for many small business owners, it can be hard to keep up!  You’re busy running your business but haven’t quite gotten to the level where you can have dedicated finance help so it’s all too easy for a deadline or two to get away from you!

And paying interest and penalties to our esteemed government is generally not good use of your business resources!

Additionally, getting offside with CRA can absolutely expose your business to significant negative consequences - in worst case scenarios, even leading to freezing of bank accounts, demands to pay sent to your customers, expensive penalties … All of these can threaten the very existence of your business and your own personal financial security as a business owner.

Something else to keep in mind is that taxpayers who file on time are much less likely to be subject to CRA follow up and audit - both a time consuming and stressful development for any small business owner .

So in today’s blog, we’re going to cover some of the more important due dates that will be arriving in 2021. (And fo course, these dates apply to any year with minor adjustments for due dates falling on a weekend or holiday.)  

You can pop these dates into your calendar with reminders set, so you’ll never have a deadline sneak up on you again!

If you want a free handy reference guide for these deadlines, grab our “Tax Due Dates and Deadlines” guide here - www.marilyncrowley.com/tax_due_dates

 Something to keep in mind is this blog outlines general due dates and guidelines.  As with almost everything tax related, there are exceptions and special rules for certain cases.  Please consult your own accountant or financial advisor with any questions on how this information applies to your unique situation.

 

First, let’s talk about a significant interest relief announcement for certain taxpayers for their 2020 return

Before we dive into the general rules regarding tax deadlines, let’s talk about a significant deferral of the tax balance due date for 2020 that applies to taxpayers who meet certain criteria (which I’ll outline below).

 

Canada Revenue Agency recently announced that for taxpayers who meet these criteria, they will not have to pay interest on any amount owing on their 2020 T1 Individual Income Tax and Benefit Return until April 30, 2022. Effectively a one year deferral on paying the balance owing from 2020. 

 

In order to qualify, an individual must meet ALL of the following criteria.

Your total taxable income for 2020 was $75,000 or less.

You received at least one COVID-19 benefit (including provincial or territorial emergency benefits in 2020. These programs would include, for example, Canada Emergency Response Benefit (CERB); Canada Recovery Benefit (CRB); Employment Insurance (EI); Canada Recovery Sickness Benefit (CRSB) and other similar initiatives announced to deal with the pandemic fall out.

You filed your 2020 income tax and benefit return.

You have a balance owing on your 2020 taxes.

If you meet all of these criteria, CRA will automatically provide interest relief on the outstanding balance until April 30, 2022.

 

Note that this interest relief does not apply to any other balance that you may have outstanding with CRA, for example from previous taxation years or HST/GST amounts owing.

 

Additionally, late filing penalties will still apply so taxpayer’s who qualify to have until April 30, 2022 to pay their outstanding balance without interest still have to file their return on time (or pay what can be significant late filing charges).

 

The impetus behind this interest deferral is the concern that many taxpayers who needed government assistance to financially get through the pandemic are not yet in a position to pay the taxes that may be owing on the benefits received. 

 

Many taxpayers who took advantage of these benefits were small business owners impacted by the lockdown restrictions imposed by the government.  Since in order to keep their business going, many of these same taxpayers took on a significant amount of debt from a variety of sources - including high interest sources, in some cases.  

 

These taxpayers will definitely benefit from the effective deferral of the balance owing due date for their 2020 return.

 

Selected Deadlines for Proprietorships and Partnerships

Below are some important (and common) deadlines that taxpayers who are unincorporated small businesses need to keep in mind in order to stay on side with filing requirements and avoid costly interest and penalties.

 

January

15th The final payroll tax withholdings for the prior year’s payments are due on January 15th.

Also keep in mind that this is a good opportunity to make sure that all of the withholdings for the year were made and there were no unintended underpayments or missed payments during the year. This way, you can make sure that your T4s balance and avoid any penalties from under remitting.

Most businesses now use some type of payroll software - Wagepoint or Humi, for instance - so errors have definitely been reduced and withholdings should occur fairly seamlessly.

 

February 

28th T4s and T4 Summaries reporting remuneration paid to employees during the year must be submitted to the Canada Revenue Agency by today. 

In 2021, because the actual deadline falls on a Sunday, you have until the end of the next business day to submit these important documents.

 

For most employers, the advent of powerful accounting software (like Wagepoint and Humi, mentioned above) and the prevalence of outsourced payroll providers  means that most have this reporting done well in advance of the deadline. And of course, employees favourite question in February is “When will the T4s be ready?”  Regardless, this is an important deadline and one that you don’t want to miss so a reminder never hurts. 

 

March

1st 60 days after the end of the calendar (which in a leap year actually falls on February 29th) is the final day to make an Registered Retirement Savings Plan contribution which can be deducted on the prior year’s income tax return. 

While you’re dong a final top up for your RRSP is a good time to consider setting up a weekly or monthly contribution based on what you can manage from your earnings. It is definitely easier to make a smaller contribution on a regular basis than to try and put aside an amount for a large contribution at the deadline.

 

15th The first instalment of the calendar year is due today.  Because this amount is due before returns from the prior year are filed and processed, for most taxpayers, the instalment reminder will be based on the second prior taxation year.  

In general, if your balance owing (or instalments plus balance owing if you made instalments in the tax year) is greater than $3,000 ($1,800 in Quebec) you will be required to pay your taxes by instalment.

Instalments can be a little complicated so we’ll plan to do a full blown discussion of this topic and post it on the blog soon.

 

April

30th Today is the due date for most Canadian taxpayers - with the exception of anyone who claims self employed earnings (or is the spouse of anyone who claims self employed earnings).

For those people, the deadline to file the T1 individual Income Tax and Benefit Return is extended to June 15th. 

However, if you have any balance of tax owing on your T1, even if you have the June 15th deadline for filing, you must make final payment by April 30th or the balance may be subject to interest and penalties (with the exception for the 2020 balance discussed above that applies to taxpayers who meet the criteria for an interest deferral.)  

This means that even if you don’t have to file by the end of April, you still need to have a pretty good idea of what your tax return for the year is going to look like in order to determine whether or not you need to make an additional payment.

 

June   

15th As noted above, anyone claiming self employed earnings (or who is the spouse of someone claiming self employed earnings) has until today to file their T1 - Individual Income Tax and Benefit Return.

 

15th The second instalment of the calendar year is due today.  Because this amount is due before returns from the prior year have been processed in many cases, like the March payment, this instalment reminder will be based on the second prior taxation year.

 

September

15th The third tax instalment for taxpayer’s who are subject to the instalment rules (generally, have a balance payable before instalments made for the tax year, in excess of $3,000 (or $1,800 in Quebec) need to make the required payment by today.

Because tax returns have been filed and processed for the prior taxation year, the third and fourth instalment will be adjusted based on the actual balance payable taking into consideration what the first and second instalments were.

Again, instalments can be tricky so if this all sounds confusing, we will have a more detailed post about how instalments are calculated, what your obligation to pay instalments is in any given taxation year and all of the ins and outs of the Canadian instalment rules.

 

December 

15th Fourth and final instalment payment is due for the year.  If it has become clear that your tax payable for the year will be less than the amount utilized by CRA to calculate your  instalments for the year so far, you are entitled to adjust this final payment - although if  your estimate is wrong, you may be subject to interest and penalties for not meeting the recommended minimum instalments for the year.

 

Every month

15th Payroll source deductions are due for most employers the 15th of every month - sending both the employer and the employee share of Canada Pension Plan, Employment Insurance and employee tax withholdings to CRA.

Since the employer is essentially acting as a trustee for the government in the collection of source deductions, it’s very important to remit these funds on time and accurately.

Some smaller employers can qualify for quarterly remittances of payroll withholdings but this requires a perfect payment history and permission from CRA.  Conversely, larger employers are subject to accelerated remittances - making payments multiple times each month. For simplicity sake, in this discussion, I haven't addressed these situations.

Last day of month

For monthly HST remitters, the HST return and payment of any net tax balance owing is due on the final day of the month.  Businesses with taxable sales in excess of $6 million annually, must file their return and remit every month.  Businesses with lower taxable sales may elect to file monthly if they wish.  For instance, if you want to make smaller more frequent payments (rather than remitting only quarterly or annually). HST is another one of those things that can be very complex! Seek professional help to determine how these rules apply to your business. 

And again, your business is collecting this tax on behalf of the government so it’s extremely important that remittances are made accurately and on time.

 

Selected Deadlines for Corporations

A number of the deadlines are the same regardless of whether you run your Canadian business through a corporation or you are an unincorporated proprietorship or partnership.  But just so that we have everything in one place, I will repeat the dates that are the same.

 

January

15th The final payroll tax withholdings for the prior year’s payments are due on January 15th.

Also keep in mind that this is a good opportunity to make sure that all of the withholdings for the year were made and there were no unintended underpayments or missed payments during the year. This way, you can make sure that your T4s balance and avoid any penalties from under remitting.

Most businesses now use some type of payroll software - Wagepoint or Humi, for instance - so errors have definitely been reduced and withholdings should occur fairly seamlessly.

 

February 

28th T4s and T4 Summaries must be submitted to the Canada Revenue Agency by today.

In 2021, because the actual deadline falls on a Sunday, you have until the end of the next business day to submit these important documents.

For most employers, the advent of powerful accounting software (like Wagepoint or Humi among others) and the prevalence of outsource payroll providers means that most have this reporting done well in advance of the deadline. And of course, employees favourite question in February is “When will the T4s be ready?”  Regardless, this is an important deadline and one that you don’t want to miss so a reminder never hurts. 

 

March

31st For most small privately held Canadian corporations who operate with a December 31st fiscal year end, the end of March is the last day to pay any remaining balance of tax owing without incurring any interest or penalties.  This deadline applies to privately held corporations whose taxable income does not exceed $500,000 for the year (when including all of the corporations in the associated group, if any.) 

For larger corporations or those that are not Canadian controlled private corporations, this deadline is actually one month earlier - February 28th (or 29th).

In general, many corporations choose December 31st for their fiscal year end.  However, if your corporation has a non-calendar year end, these payment deadlines for tax balances due are two or three months after that year end.  

For example, with a September 30th year end, if you are a small, privately held corporation, your final tax balance owing is December 31st while those who don’t meet all of the rules regarding the $500,000 limit, must make any final payment by November 30th. 

 

Every month

15th Payroll source deductions are due for most employers the 15th of every month - sending both the employer and the employee share of Canada Pension Plan, Employment Insurance and employee tax withholdings to CRA.

Since the employer is essentially acting as a trustee for the government in the collection of source deductions, it’s very important to remit these funds on time and accurately.

Some smaller employers can qualify for quarterly remittances of payroll withholdings but this requires a perfect payment history and permission from CRA.  Conversely, larger employers are subject to accelerated remittances - making payments multiple times each month. For simplicity sake, in this discussion, I haven't addressed these situations.

 

Last day of the month - HST

For monthly HST remitters, the HST return and payment of any net tax balance owing is due on the final day of the month.  Businesses with taxable sales in excess of $6 million annually, must file their return and remit every month.  Businesses with lower taxable sales may elect to file monthly if they wish.  For instance, if you want to make smaller more frequent payments (rather than remitting only quarterly or annually). The quarters and the annual deadline are again based on the corporation’s particular fiscal year.

HST is another one of those things that can be very complex! Seek professional help to determine how these rules apply to your business. 

And as a reminder, your business is collecting this tax on behalf of the government so it’s extremely important that remittances are made accurately and on time.

 

Last day of the month - corporate tax instalment

Generally, if your corporation had tax payable in excess of $3,000, you will need to make monthly instalments of expected tax payable for the current taxation year.

Certain smaller corporations who have a perfect payment history for HST, payroll withholdings and corporate tax may be eligible to pay on a quarterly basis.

 Again, instalment requirements can be quite confusing but your accountant should give you a suggested instalment schedule for the following year and CRA does provide reminders based on their calculation.  As long as you follow these recommendations, you should stay onside with all of the rules around instalments and avoid paying any interest or penalties.

 

As always, the above is presented for general information only and nothing in this post constitutes specific professional advice of any nature. Each taxpayer's situation is unique and everyone must discuss how these rules applies in their particular situation from a properly retained accountant or financial advisor.