If you are an employee, your tax-filing deadline for 2015 returns is May 2. If you haven’t filed yet, better get on with it! However, if you are self-employed, or even if you simply carry on a business on the side in addition to your employment, you might have time to take a month or two “vacation” from filing your taxes, because you may be able to take advantage of a June 15 filing deadline for your return.
Here’s how it works: If you carried on a business in the taxation year (subject to certain restrictions relating to the type of business carried on – see below), you are given until June 15 of the following year to file a return. This later deadline is also extended to your spouse (including a common-law spouse or partner). For convenience, we’ll just refer to them all generally as “spouse.”
However, if your spouse was living separate and apart from you as of Dec. 31, 2015, by reason of a breakdown of the marriage and for a period of at least 90 days that includes December 31, your spouse does not get to enjoy the benefit of the extended June 15 deadline and must file by April.
Of course, if both you and your spouse carried on a business in the taxation year, you are each granted the June 15 deadline regardless of whether you are living together.
The June 15 extension relates to the fact that all individuals carrying on business are required to have a December 31 year-end (or to pay tax as though they did). Corporations that have a year-end of December 31 have until June 30 to file their tax return; so it only seems fair that if you are carrying on a business as an individual, you should get similar (if not exactly the same) treatment.
Pitfalls and penalties
Of course, there are some pitfalls to be aware of. Even though you can file a return up to June 15, any taxes owing are still due on April 30; otherwise, you will be charged interest on unpaid taxes.
Even so, this deadline may be very helpful if you miss the April 30 filing deadline and you owe taxes: If you don’t file your return on time (either by April 30 or, if you qualify for the extended deadline, June 15), you will be subject to a penalty of 5% of the tax unpaid when the return should have been filed, plus 1% of the tax outstanding at the time of the filing deadline, multiplied by the number of complete months (not exceeding 12) between the actual filing deadline and when you actually filed the return.
In short, the maximum penalty is 17% of the tax unpaid. The penalty can be applied even if you file the return only two days late. This penalty is added to your assessment, and if you want to object, you have to actually file a Notice Of Objection to the assessment.
Note: If you have a habit of filing late, be aware that if you were charged this penalty for your previous three past tax returns, the penalties are doubled for the 2015 tax year (10% of the tax owing plus 2% for each month outstanding).
Of course, if you are late filing due to circumstances beyond your control (e.g., you are hospitalized due to a serious illness), you can apply for leniency by making an application under the taxpayer relief provisions to have the penalties and interest reduced. The request should be made in writing and addressed to your local Tax Services Office.
If you find yourself unable to file by April 30, it may be particularly important to determine whether you qualify for the June 15 extension. It applies if you are a “consultant,” i.e., you are classified as an "independent contractor" rather than an "employee" for tax purposes. The June 15 deadline will also apply if you carry on business through a partnership – even if you are a limited partner.
Since many investments are structured as limited partnerships, this seems to open up the possibility that investors in these vehicles might be able to file on June 15. In fact, the rules appear to say that if you met the prerequisites at any time during the year, you’re eligible for the extension. But if you invested in a tax shelter investment, you will not be eligible for the June 15 deadline.
More specifically, if the expenditures made in the course of your carrying on the business are primarily the cost or capital cost of tax shelter investments, or primarily tax shelter investments themselves, you won’t qualify for the extended deadline.
For this purpose, tax shelter investments are certain limited partnership interests (basically where expected writeoffs within four years of acquisition equal or exceed the cost of your investment, net of prescribed benefits), or are registered tax shelters as defined in the Income Tax Act.
This is a close reading of a lot of tax fine print. So it may be prudent not to claim the extension unless you’re in a jam. However, if you have been assessed late filing penalties, these arguments may come in handy.
If your spouse takes advantage of filing by the June 15 deadline, you should be aware that this extension is not a family-wide benefit. If you have any children who file returns, those returns must still be filed by April 30.
The extension for your spouse (if you are carrying on business) is granted mainly to facilitate compliance with the child tax benefit provisions for 2015, which requires filings by both spouses.
Accordingly, the issue of whether you and your spouse are living together is determined under the child tax benefit rules. Happily, the extension applies regardless of whether your spouse actually receives the child tax benefit; for example, it applies even if you and your spouse have no children.
Previously published in The Fund Library Thursday, April 28, 2016.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.