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Outsourced CFO | Avoiding Penalties For Filing Taxes Late
There are many reasons why business owners may believe that filing taxes late is beneficial to their business says outsourced CFO. On the reasons why, is because business owners think that they owe their taxes at the time that they file them. Also, another reason is business owners think that they will save on interest simply by filing their taxes late, because business owners believe that they start owing interest on the date that they file. Neither of these reasons works, and actually can make business owners who are having cash flow problems worse.
Business owners believe that simply because they owe the taxes at the time of filing, they can make their situation better by filing their taxes only when they have the money to pay their taxes. Unfortunately, the penalties that they get for filing late, only makes how much money they owe later worse. They will owe more than they did at the beginning, if they file late. Also, business owners should know that if they are having a hard time paying their taxes, they can always contact CRA in order to work out a payment plan. If people owe money on their personal or their corporate taxes, Canada revenue agency will often allow them to work out a payment plan that has them paying off the money that they owe within six months. That can help entrepreneurs are having cash flow problems minimize those cash flow problems by giving them a payment plan to work from. Rather than filing their taxes late, and hoping that they will be able to pay their taxes in full later and then getting penalties on top of that they owe.
Business owners also should understand that they start owing interest on the taxes that they need to pay three months after their fiscal year end. Regardless of when they file their taxes, they will start accruing interest on the three-month mark. Also outsourced CFO says that the interest that business owners start accruing is only 1% on the total amount per year. This is such a small interest charge, that business owners should not be afraid of the interest charge as a reason for filing their taxes late.
Business owners who have made this error, thinking that by filing their taxes late can help them, who have not yet been getting phone calls or letters from CRA asking them to file, can voluntarily disclose to CRA that they are late. What this does says outsource CFO is allows business owner to have a conversation with CRA in order to admit that they are late, and that they will pay the interest. This will often allow CRA to waive the penalties, as long as the business owner agrees to file by a specified time, and pay the interest charges. Business owners can often save their penalties by opening the communications with CRA. there are many challenges that entrepreneurs face in business, making situations worse by incurring penalties only adds to business owners problems.
Entrepreneurs often have to get creative in order to find ways to increase cash flow in their business says outsourced CFO. Itís the second most common reason why businesses fail in Canada today. And while there are lots of things that business owners can do in order to increase the cash flow in their business, Filing taxes late not only does not help businesses improve the cash flow in their business, but it actually makes situations far worse for them almost immediately.
There are several things that business owners need to know when it comes to filing personal as well as corporate tax in order to avoid running into problems. Outsourced CFO says that the penalties that people will see for filing their personal and corporate taxes late is fairly large. If there only one year in arrears, there late penalty is being charged an additional 5% of the taxes that they owe plus 1% each month. If they happen to be more than one year in arrears, this additional years are penalized at 10% of the taxes that they owe plus 2% each month. Not only does this amount add up superfast, entrepreneurs are also expected to pay interest on the outstanding balances at 6% per year on top of the penalties.
Everyone should file on time, even if they donít have the money to pay says outsourced CFO, because itís not going to increase the amount of money that a person owes, nor will it affect the amount of interest that a person owes. Many people believe that they start accruing interest on the day they file their taxes, but this is not true. Therefore, filing late will not help them save interest. All filing on time does, is save those penalties. If people want to avoid having to pay more taxes, all they have to do is file on time.
The personal filing deadline is April 30 for most people says outsource CFO. However, if a person or their spouse owns a proprietorship, they are filing deadline is June 15. This can create an opportunity for planning says outsourced CFO. The reason for this, is because the threshold for being considered a proprietorship is extremely low. If people have been able to say that they earned additional income that wasnít to run through corporation, they will be able to claim that they have a proprietorship, and use the June 15 deadline. All people need to do is think back in their life to remember if they have taken any cash from anyone for services rendered that wasnít to run through a business. Such as, giving friends a ride to the airport, for gas money. Babysitting, dog walking, getting the mail for friend on vacation. if someone has taken any amount of money for doing a variety of things in their life, they will be able to claim that they have a proprietorship, and utilize the leader deadline.