DON'T procrastinate. Instead, communicate.
If you owe income tax but don't have the money, do contact the tax office before they contact you.
And most important, file your tax return by the April 30 deadline to avoid the late filing penalties (even though you will be charged compounding interest on your debt):
The penalty is five per cent of your 2012 balance owing, plus one per cent of that balance for each full month that your return is late, to a maximum of 12 months.
If you were charged a late-filing penalty on your return for 2009, 2010, or 2011 your late-filing penalty for 2012 could double to 10 per cent of your 2012 balance owing, plus two per cent of your 2012 balance for each full month that your return is late, to a maximum of 20 months.
Canada Revenue Agency will listen to reasons why you are unable to pay your taxes on time. But CRA considers itself a preferred creditor, and expects you to rearrange your finances or borrow to pay what you owe.
To indicate your willingness to pay your tax debt, a good approach is to send in some money with your tax return by April 30, along with a proposal to pay the rest - ideally accompanied by post-dated cheques or another automatic payment plan.
You can also contact the CRA to discuss a payment arrangement at 1-888-8638657 between 4 a.m. and 8 p.m. Monday to Friday. For more details on payment arrangement options, go to cra-arc.gc.ca and search the term "making payments for individuals."
Although the CRA has powerful weapons at its disposal to collect what you owe - for example, garnishing your wages or forcing you to sell assets - it also has a Taxpayer Bill of Rights. Two of the 15 "rights" are relevant here: 5. You have the right to be treated professionally, courteously and fairly.
12. You have the right to relief from penalties and interest under tax legislation because of extraordinary circumstances.
You could refer to these rights if you feel you aren't being treated fairly, or your circumstances warrant special consideration.
Mike Grenby is a columnist and independent personal financial advisor; he'll answer questions in this column as space allows but cannot reply personally. Email [email protected].
