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Entrepreneurs often don’t realize the consequences of filing their taxes late says Outsourced accounting services. Because of that, they believe that by filing their taxes late, they can stretch the amount of time they have to get the money together to pay their taxes, and avoid incurring interest charges. However, the only thing that filing their taxes late does, is incur penalties.
Business owners believe that they can save interest in their business on the taxes that they owe simply by filing late. Outsourced accounting services says that business owners are mistaken when they think that they can save interest by filing late. The reason for this, is because business owners start accruing interest on the taxes that they owe three months after their fiscal year end. Even though the taxes are not due to be filed until six months after their fiscal year end, the interest starts accruing the three-month mark. Therefore, business owners are not saving themselves any thing in interest charges by filing their taxes late. Plus, the interest that they are being assessed is so minimal, it is not worth worrying about. The interest on corporate and personal taxes is 1% of the entire amount per year. The penalties on the other hand, are much higher and to risk paying a high penalty in order to save low interest is not worth the risk.
Business owners often believe also, that they can stretch the amount of time they have to pay their taxes, by filing late. However, business owners will get hit with penalties that all filing late does, is increase the amount of money they have to pay to Canada revenue agency. Even if they aren’t able to pay their taxes on time, they can minimize the amount of money that they owe the government, simply by filing their taxes on the deadline says Outsourced accounting services. If people truly need help in paying their taxes whether it’s corporate or personal, they can always contact Canada revenue agency themselves, to work out a payment plan for their arrears. CRA generally allows up to six months for people to pay their taxes, as long as they are keeping the line of communication open with CRA.
If business owners have missed their filing deadline, there may be hope for them to avoid penalties says Outsourced accounting services. All they need to do, is again contact Canada revenue agency before CRA start sending them letters and phone calls asking them to file their taxes. If they can contact CRA first, they can do what is called a voluntary disclosure. This is where the business owner informs CRA that they are late. They can set up dates in which the business owner promises to have their taxes filed by, and then an agreement in place to pay for the interest. CRA often is authorized to get rid of the penalties that a business owner would incur for being late. The penalties are the exact reason why and drives up the amount that business owners have to pay.
Entrepreneurs often run into cash flow issues says Outsourced accounting services. Industry Canada has a statistic that says that 50% of all businesses in Canada fail within five years. 29% of those failed entrepreneurs will cite that they ran out of cash as the reason why their business was forced to close. Cash flow issues are a common reality for most entrepreneurs, and many of them try to come up with creative ways to increase the cash flow in their business in order to avoid being forced to close their business is down. Many think that filing their taxes late can help them deal with this, but all it does is makes it worse because it increases the amount they have to pay because they get penalties on top of what they owe. There is literally no benefit to a business owner filing their taxes late.
The penalties that they will get assessed with if they filed late says Outsourced accounting services, is 5% of the taxes that they owe plus 1% each month. If a business owner happens to be late multiple years, this additional years that they owe will be double the penalty. 10% of the taxes that they owe plus 2% per month. The penalties don’t end there either, they will also have to pay additional interest on top of the outstanding balances, which is currently 6% per year on top of penalties. This has recently gone up in Canada, it used to be only 5%. So business owners need to be aware, that the penalties are even higher.
If a business owner has realize that they have made an error, and it’s too late because there filing deadline has passed, it may not actually be too late says Outsourced accounting services. As long as CRA hasn’t started asking them to file either through phone calls or letters, a business owner can contact Canada revenue agency and work out a plan. All they have to do is tell them that they are late, and promised to have the filing done by a set deadline. Then, business owners only have to pay the interest, and CRA will usually eliminate the penalties that the business owner has to pay.
The only time that this is a little bit different, is if the taxes that a business owner owes is GST. The reason for this, is because CRA use not paying GST a little bit stricter. They view the money as a trust account, which the money does not belong to the business owner. If a business owner is having trouble paying the GST, Outsourced accounting services says that must mean the business owner collected GST from that’s clients, and then started using that money in order to fund their private business. CRA is not happy with business owners using government money to operate their business.
