The Canada Revenue Agency’s (CRA’s) responsibilities extend beyond collecting taxes. Another key function is administering various government benefits and incentive programs for Canadian citizens. All working individuals and businesses have the legal obligation to pay taxes on income, goods and services, property, and other financial transactions. Taxes fund essential public services and infrastructure.
Meanwhile, the CRA expect taxpayers to comply and be aware of three major red flags. Grave consequences for non-compliance include losing thousands of government benefits.
Failure to file taxes
Filing taxes in Canada is mandatory for employed and self-employed individuals. The tax year is from January 1 to December 31. The deadline for submitting personal tax returns is April 30 of the following year. Self-employed individuals have until June 15, although taxes owed must be paid by April 30.
The penalty for late filing begins at 5% of the taxes owed, plus additional monthly charges if the amount remains unpaid. However, a remiss will result in the loss of all-important government benefits such as the Canada Child Benefit (CCB) and Goods & Services Tax/Harmonized Sales Tax (GST/HST) credits.
If you’re eligible to receive the CCB, it could reach as much as $7,787 per child. The maximum GST/HST credit for 2025 is from $533 to $698 and $184 for each child under 19. Gross income must not exceed $52,225 for single individuals and $69,015 for married couples with four children.
Fraudulent claim
The CRA is tough on taxpayers who intentionally claim benefits to which they are not entitled or are ineligible to receive. In addition to repaying the full benefit amount received, the tax agency may reduce or terminate future benefit eligibility. Criminal prosecution or filing of charges is also possible.
Conducting a business in a TFSA
Canadians can utilize the Tax-Free Savings Account (TFSA) to save and invest for retirement or meet short-term financial goals. Income earned inside the account is tax-exempt, provided you follow the contribution rules to avoid paying penalty taxes (1% of over-contribution).
A general restriction, if not a costly mistake, is conducting a business within the TFSA. The CRA prohibits day trading or aggressive buying and selling of stocks. High-frequency stock trading negates the tax benefits and may be classified as taxable business income if CRA auditors determine you violated this golden rule.
Growth stocks, such as Tenaz Energy (TSX:TNZ), are qualified investments in a TFSA. The small-cap stock presents an opportunity to make massive capital gains in a shorter timeframe. At $19.89 per share, the year-to-date gain is +41.77% following a +68.13% advance in the last three months.
The $558.6 million oil and gas company acquire and exploits conventional and semi-conventional producing assets in overseas markets. Tenaz employs a balanced capital markets model, prioritizing free cash flow generation. Unfortunately, attempting to enter and exit the market to capitalize on the stock’s upward momentum and earn quick bucks will raise alarm bells.
TNZ is a top performer, boasting a total return of +808.22% over the past three years. Consider a longer holding period in a TFSA for potential outsized profits in the future and avoid the CRA’s scrutiny.
Preserve your CRA benefits
The CRA’s mandate is to enforce the tax law. You preserve the government benefits and other tax advantages by ensuring timely, accurate, and honest reporting of income.
