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Business owners need to understand that even if they arenít able to pay their taxes at the time that they file them, they should still file them anyway. They can always enter into a payment plan with Canada revenue agency that will allow them to take up to six months to pay off their taxes. This is a much better plan, because they can help business owners improve their cash flow even more with a payment plan Says outsourced CFO.
The penalties that business owners incur for filing their taxes late can add up very quickly. Just by filing late the first time, business owners can incur a penalty that is 5% of they balance of the taxes that they owe +1% interest per month. If a business owner is late more than one year, the second and subsequent years are penalized at 10% of the balance owing and 2% interest per month. Not only does this add up really fast says outsourced CFO, but they will also incur interest on the outstanding balances of 6% per year in addition to the penalties. This is up from the 5% that it used to be.so business owners should understand, that with the payment plan option in place, and the severe penalties that CRA pensive for late filing, itís never in the business ownerís best interest to file late.
In order to avoid filing late, business owners need to understand what the filing deadlines are says outsourced CFO. Corporate year-end filingís are due six months after their corporate year end. Business owners start accruing interest at three months which is 1% per year. Regardless of when there fiscal year end is, business owners need to know that six months after that date, they need to have their corporate taxes filed else they will incur penalties.
If business owners are late unintentionally, and CRA has not yet contacted them to let them know that they owe taxes, either through demand letters or phone calls, then business owners can perhaps avoid penalties by do is called voluntary disclosure says outsourced CFO. With that is, that the business owner will contact CRA to confess that they are late, they intend on paying the interest and then CRA will often waive the penalties. Since penalties are what add up expenses immensely, this can be a huge help to business owners who filed late for a variety of reasons.
When business owners start trying to increase the cash flow in creative ways such as by avoiding filing their taxes in order to increase the cash flow, their business may be in a huge amount of trouble to begin with says outsource CFO. If there businesses already in trouble, the last thing they need to do is file their taxes late because late penalties are huge, and will make a business ownerís bad situation worse by forcing them to owe more money. They already have a hard time paying the taxes that they have, the penalty charges can make it far worse.
There are three different tax deadlines that business owners need to keep in mind says outsourced CFO in order to avoid paying penalties. The first is the corporate taxes. Corporate taxes are due six months after a businesses fiscal year end. Many business owners believe that the fiscal year end is chosen 12 months after they incorporate, or get a GST number, but business owners can choose whatever date they want as their corporate year-end. Whatever date that is, there corporate taxes are due six months after that. Business owners should also understand that interest on those taxes do start at three months which is 1% per year.
The next tax deadline that business owners should keep in mind in their business, is when there GST is due. There GST is due three months after their fiscal year and says outsource CFO. This is often confusing and difficult for business owners, because there GST is due three months before their corporate taxes are due. If they understand this, they should is the opportunity to plan with their accountant, to avoid charges.
The next tax deadline that business owners should also keep in mind is for the personal tax. Even though business owners have to pay their corporate taxes six months after their fiscal year end, outsource CFO says business owner still need to pay their personal taxes. April 30 is the deadline for almost everyone across Canada, however if a person or their spouse owns and unincorporated business, that deadline is pushed back a month and have to June 15. Business owners need to understand that they start charging interest from April 30 though the filing date is a month and a half later.
Business owners to understand that even though there all these deadlines remember, that the penalties they incur for being late on filing them is large, and can add up says outsourced CFO. If business owners are late filing the first time, the penalties incur will be 5% of the amount of the taxes that they owe +1% interest per month. If they are late additional times, like two or three years, each additional year after the first is penalized at 10% of the amounts owing +2% per month. These amounts can add up fast, especially depending on how much the business owner owes corporate taxes to begin with.
