Outsourced CFO | Avoiding Penalties By Paying Corporate Taxes On Time
Entrepreneurs may think that they are being extremely savvy by avoiding paying their corporate taxes on time, thinking that by delaying filing, they can use the taxes that they wouldíve paid to increase the cash flow in their business says outsourced CFO. . There is no logical reason why there are any benefits to delaying filing corporate taxes. In addition to having no reason that is beneficial to delay paying corporate taxes, business owners can also be hit with numerous penalties. There are several reasons why delaying paying corporate taxes is a very bad idea and should be avoided at all costs.
The first thing that business owners should understand, is exactly what the penalties are for not paying corporate taxes on time says outsourced CFO. The first time that business owners are late paying their corporate taxes, penalties that they get hit with our having to pay an additional 5% of the taxes that are already opening plus interest of 1% per month. If a business owner is late in filing by more than one year, for every year that they havenít filed, business owners owe penalty of 10% of the taxes that they owe plus 2% interest per month. Not only are these the penalties that business owners have to pay to Canada revenue agency, however there is also interest on top of the outstanding balance that is 6% per year in addition to the penalties. All of these additional penalties and interest charges can add up extremely fast, especially if business owners owe a lot in taxes, or havenít filed for a significant amount of time. Itís extremely important that business owners use this information to ensure that they always file their corporate taxes on time.
Many business owners may not actually understand when there corporate taxes are due. Outsourced CFO says that unlike the personal tax deadline, the corporate tax deadlines vary from business to business. What ever their fiscal year end is, there corporate filing is due six months later. Business owners can literally choose any date to be their fiscal year and. If they choose December 31 as their fiscal year end, June 30 is there filing deadline. If there fiscal year and is March 31, they have until September 30 to file.
Many entrepreneurs believe that by delaying there filing, they can actually effectively avoid paying interest on the taxes that they owe says outsourced CFO. This is actually very untrue, because business owners start accruing interest on the taxes that they owe three months after their fiscal year end. This means that they start accruing interest three months before there filing is even do. However, the amount of interest that is accrued on taxes that are not over do, is so small itís not worth the business ownerís time worrying about it. The interest is 1% per year. The penalties for filing late are much higher than any perceived savings on interest that a business owner thinks they might get filing late.
Many business owners who are not sure of when there corporate year end is run into significant problems says outsourced CFO, because they donít realize that they are incurring charges just by not filing on time. Business owners can avoid huge problems in their business, just by understanding when there fiscal year and is, and filing on time whether they can afford to pay taxes or not.
If business owners know that they have missed their filing deadline, but Canada revenue agency has not yet started to phone them or send demand letters, business owners can contact Canada revenue agency, to inform them that they are late. This is called voluntary disclosure says outsourced CFO, and is a way to admit to CRA but a business owner screwed up, but the like to eliminate the penalties. CRA often believe the penalties if a business owner who has filed late, or missed their filing deadline admits to it. Since the penalties are often so severe, this can be a valuable tool that business owners can use to avoid paying additional charges. The only thing a business owner needs to know about this method, is that they have to admit to CRA that they havenít paid before CRA notices and starts reaching out to the business first.
If the business owner thinks that they can delay filing their taxes in order to try to come up with the amount of taxes that they owe, they should understand that simply by filing late, we will incur those charges. Outsourced CFO says they should file their taxes on time regardless of if they can pay them or not. Thereís always the option of going to Canada revenue agency, and asking them for a payment plan. CRA can offer payment plans of up to six months to pay for corporate taxes. For this reason, business owners should definitely avoid filing late in order to generate enough revenue to pay their taxes. Itís far more beneficial to them, to file on time and then work out a payment plan with Canada revenue agency, then it is to miss the filing deadline.
Business owners need to understand what the deadline is in order to avoid missing it. What ever date their fiscal year and is, there corporate taxes are due to be filed six months after that date. Business owners can literally choose any date they want for their fiscal year and says outsourced CFO, so they may want to be very strategic and how they choose that date. If they want to ensure that there choosing a date that can easily remember, business owners can choose their year-end that way. Often, business owners choose their fiscal year end based on when they first filed corporate taxes when they first started their business. Since they donít owe any taxes until later in a profit, many business owners use that factor in choosing when there year it is.