Outsourced CFO | Avoiding Paying Corporate Taxes Late
Business owners may not understand how severe the penalties are filing corporate taxes late says outsourced CFO. They may believe that all they have to do is pay some interest charges, after they file their corporate deadline. Unfortunately, the penalties for missing corporate deadlines is much more severe than that. Business owners who have the potential of running into cash flow problems in their business should ensure that they file their corporate taxes on time, even if they arenít able to pay them just yet, simply to avoid the penalties that go along with it.
Regardless of the reason why a business owner may think that being there corporate taxes late is a good idea, there is no benefit to it says outsourced CFO. Many business owners believe that they start accruing interest charges after they file their taxes, but this is not true. Business owners start accruing interest on the taxes that they owe starting from the third month after their fiscal year ends. This is actually three months before the corporate year end is due. Many business owners do not realize that theyíre starting to incur interest charges before they even have to file their taxes. But, business owners should be very assured that the interests that they are accruing is very minimal. The interest is 1% a year on the amount that they owe. Itís such a minimal amount, that business owners shouldnít risk high penalties to avoid paying a 1% per year interest.
A business owner may also think that they need to avoid filing their corporate taxes because they cannot pay them at the moment. For whatever reason says outsourced CFO, business owners may not be able to pay their corporate taxes at the moment. 29% of all failed businesses say that running out of money is a reason their business failed, so itís not an uncommon problem at all. If business owners are unable to pay taxes, all that filing late does, is make that problem worse by putting penalties on top of what they already canít pay. A far better solution, is for business owners to file the taxes regardless of if they can pay them or not. this way, they can avoid incurring penalties.
Business owners who are having a hard time paying their corporate taxes, always have the option of contacting Canada revenue agency and working out a payment plan with them. They are more than reasonable when it comes to paying taxes, that as long as a business owner communicates with them, and explains what they need, CRA is often more than willing to help. They can offer a payment. Up to six months in order to help the business owner pay their taxes. This may be all that a business owner needs in order to avoid running into cash flow problems in their business. Thereís literally no reason that a business owner should not file their corporate taxes on time every single year.
Business owners who end up being very short on cash often believe that by delaying when they file their corporate taxes, they can effectively deal with a strained cash flow says outsourced CFO. However all this does, is makes their situation far worse by triggering significant penalties from Canada revenue agency. If the business owner is already running into cash flow problems, having to pay additional penalties is extremely detrimental to their business. Since 50% of all entrepreneurs go out of business within five years, 29% of those failed entrepreneurs say that running out of money was the reason they had to close the doors to their business. Since cash flow problems are such a significant reason why business owners fail, entrepreneurs should come up with a strategy on how to deal with cash flow issues proactively, instead of panicking when it happens, and utilizing inefficient methods that can not only not work, but actually make their situations far worse.
Business owners should understand what their corporate filing deadline is, in order to ensure that they never miss that deadline says outsourced CFO. The business owner needs to understand that there corporate deadline for taxes is six months after their fiscal year and in their business. Many business owners are either unaware of that, or believe that their fiscal year and is when their taxes are due. By understanding when they actually are due, they could be prepared to not file late. Although there taxes are to do for six months, they actually start accruing interest at three months. This is nothing that business owners should worry about, even ones who are already in a tax crunch. The interest that they start accruing is 1% a year on the entire amount owing. They shouldnít worry about having to pay interest, but they should worry about the penalties on filing late.
The charges business owners will have to pay for filing their taxes late says outsourced CFO is 5% of the balance owing and then 1% every single month. That is only for the first year that they are late. If they are late more than one year, for every single year that they are late, business owners have to pay 10% of the balance owing with 2% additional each month. This amount can add up extraordinarily fast, especially depending on how much tax the business owner owes in the first place. Then they have to consider, that on top of those penalties, there is also interest being charged on the outstanding balances of 6% a year. This can make a huge impact on a business that is already struggling.
Many business owners believe that by filing late, they will save interest charges. However outsourced CFO says that business owners should understand that there getting charged interest from three months after they have their corporate year and. And theyíre going to be paying their interest regardless. If they file on time, or if they donít file on time, will be paying those charges regardless so they should just file on time and avoid penalties.