You may be feeling guilty or ashamed about filing late returns going back a few years, but there’s probably a good reason you fell behind.
Why Do People File Late?
It starts with the first one…
For most people who have filed on time in the past, that first missed return is because of a disruption in your life that throws you off so you’re not able to keep up with everything as you normally would. In times of distress, tax filing may not seem to be the most important thing on your priority list. Even after the crisis as passed, the piled-up late returns can snowball so that every year is more daunting than the last, and you get further and further behind.
Physical and Emotional Stress
The most common source of disruption is a serious illness or accident, where you find yourself physically unable to manage all the demands of daily living. Some disruptions aren’t physical but emotional: a depressive episode, divorce, or the loss of somebody that you care about, can all be immensely upsetting. Or you may be caring for someone who is injured, ill or dying. Caregiving consumes time and energy and is a common trigger for missing a tax filing deadline.
Disasters, Fires and Floods
And finally, a little less common, but no less disruptive is a disaster, like a flood or a fire. In these kind of events you can be occupied with cleaning up, talking with the insurance company and replacing things, sometimes while having to look for a new place to live. Moreover, a destructive event tends to destroy records and documentation – the very things you need to have in order to do your taxes.
So what do you do?
Believe it or not, CRA understands
It’s important to know that the Canada Revenue Agency (CRA) does recognize that life disruptions can cause people to file returns late and often grants leniency in these cases. If you decide to seek relief from amounts owing to CRA you may be asked to explain why you fell behind, and the types of events we’ve been discussing are all recognized by CRA as significant sources of distress and legitimate explanations for late filing.
While CRA will often waive penalties and interest in cases like these, it doesn’t change the fact that you still have to file a return every year if you owe tax, or if you want to collect refunds or the credits and support payments you’re entitled to.
I have a video here about facing the difficulties of filing old returns and why it’s worth doing.
CRA will help if you talk to them
If CRA is already contacting you about filing old returns, you can ask for a deadline extension and work with them to get your affairs in order. If the tax, penalties, and/or interest are too onerous, you can submit your returns under the Voluntary Disclosure Program (VDP) or apply for interest relief under the Taxpayer Relief Provisions.
Our Free Guide Will Get You Started
If you don’t know where to start, check out our free guide to getting back on track.
There is always a first time missing filing. As years go by, the job of catching up gets bigger and bigger and a single missed return often becomes several. If this has happened to you, remember that this does not make you a bad person, even if you’re late by many years.