Outsourced CFO | Corporate Tax Deadlines
Business owners who arenít sure when their corporate taxes are due, run a risk of paying those taxes late says outsourced CFO. The deadlines for filing corporate taxes late, are extremely steep and are not often worthwhile. Not only can make a situation much more difficult for a business owner, but out of all entrepreneurs who had to close the doors to their business, 29% of them said that the reason they had to close the door to their business was due to cash flow issues. If business owners father corporate taxes late, the penalties they incur could be so detrimental to their business, that they could risk going out of business because they are unable to pay the penalties.
Business owners should first understand what the deadlines are for their corporate year end, in order to avoid paying them incorrectly. No matter when there fiscal year end is further corporations says outsourced CFO, business owners corporate taxes are due six months after their corporate year end. This means if a business owners corporate year and was in March 31, September 30 is there filing deadline. If there fiscal year and was in October 31, their taxes are due April 30. They should be sure that they get these dates memorized and inserted into their calendar so they can work to ensure that they donít miss there filing deadline.
If they do miss there filing deadline, the first year that they are late, business owners will have to pay 5% of the balance owing and 1% per month as a penalty. Business owners need to understand that there is interest at 6% per year on the outstanding balances in addition to the penalties. If business owners are more than a year late and filing, the penalties double, at 10% of the balance owing per year, plus 2% monthly. These penalties can add up quickly and significantly, especially if the amount of taxes that are owing is a very large amount says outsourced CFO.
Business owners may believe that they start accruing interest charges on their taxes that they owe once they file their corporate year and says outsourced CFO, but this is actually not true. Business owners start accruing interest three months after there fiscal year end, which actually is six months before their taxes are due. However, business owners should not be worried that this adds up to a lot of money, because the interest that is charged is 1% per year on the entire amount. The interest charges are manageable, but the penalties are not. So business owners should ensure that they do everything that they can in order to avoid filing late.
If business owners are unable to pay their taxes, and thatís the reason they donít file their taxes on time, business owners should be aware that Canada revenue agency offers payment plans for corporate taxes over a six-month period. Business owners who have a cash crunch in their business, can use this payment plan with CRA to help them get through the issues. By avoiding filing late, business owners can be assured that they never run out of money in their business due to the fact that they incurred so many penalties from filing their corporate taxes so late.
Although most business owners know exactly when their corporate year and is, and when they are supposed to pay their taxes says outsourced CFO, many business owners donít pay their taxes on time, because they believe they can either safe interest charges by filing later on, or that they can avoid paying their taxes when they file, in order to save that money to increase the cash flow in their business.
There is no good reason why business owners should pay their taxes late. Interest charges are incurred on the amount that they owe regardless of if they file their taxes or not says outsourced CFO. And if business owners are unable to pay the taxes at the time of filing, they can always work out a payment plan with the Canada revenue agency in order to pay their taxes over a six-month period of time, which is a better solution to increasing cash flow in business been funding it with tax money.
That being said, many business owners are not aware of when their corporate taxes are actually do that outsource CFO. Business owners who own a corporation, need to understand that their taxes are due six months after their fiscal year end. Many entrepreneurs think that the fiscal year end is 12 months after they incorporate their business, or 12 months after they get a GST number, or 12 months after they start operating their business, but thatís not technically true says outsource CFO. Regardless of when be incorporated, got a GST number or opened the doors to their business, their true corporate year end is when ever they file their taxes. As a result, business owners can be strategic when it comes to planning when their corporate year and is in a brand-new business says outsource CFO. For instance, if a business owner has operated their business for 20 months, technically they would be at least one year late in filing taxes. However, if a business owner didnít start turning a profit in their business until month 10, they can strategize to make their year end be the last month that they didnít earn any money. Outsourced CFO says the reason for that is, if they incur penalties on the first year of business, but they actually didnít earn enough to owe any taxes in their first year, 5% penalty on zero money is still zero money. By strategizing this way, a business that has been operating for 20 months, but didnít make a profit in the first 11, is only late filing taxes by one year, and they donít even have to pay penalties in that year. Using strategy, can help business owners minimize penalties in their corporations.