Outsourced CFO | Deadlines For Filing Taxes
One strategy that many entrepreneurs try to use to help them increase cash flow in their business says outsourced CFO, is filing their taxes late. They believe that if they file their taxes late, that delays when they have to pay taxes, and therefore increase their cash flow in their business. Unfortunately not only does this not to work, but by filing late, even one time triggers huge penalties for the business owner, making their cash flow situation go from bad to worse.
Business owners should understand what the filing deadlines are for GST, in order to avoid paying penalties on those taxes that are due. Outsource CFO says that CRA is not very tolerant on business owners who are late on their GST payments, because they view GST as a trust fund. The business owners collected GST on behalf of the government, and it’s not business owners money. They view businesses that are late in paying their GST, is using money that doesn’t belong to them in order to in their business. They also believe that a business owner should have been collecting GST as they were billing their clients, so it’s money that they should have in their business, therefore have no reason not to pay it unless they misuse those funds. Because of that, business owners should understand that their GST is due three months after their year end.
On the other hand, CRA is a bit more tolerant when it comes to personal and corporate arrears says outsourced CFO. Business owners can make their situation a lot better for themselves, by filing their taxes as soon as possible, and avoid future penalties. However, if business owners have started accruing penalties, if CRA has not started harassing them for payment yet, either by sending letters or phoning them, many business owners can apply to have those fees waived, simply by contacting CRA themselves, and voluntarily disclosing to them that they are late. By owning up to it, and agreeing to pay the interest, CRA often take the penalties off of which the business owner owes. This can help business owners who know their late, come clean without fear of making their situation worse.
Business owners should understand that by being late by one year, those penalties are 5% of the balance owing, and then 1% per month. If they are late more than one year, they owe penalties of 10% of the balance owing, and 2% per month for every year that they don’t file. By being more than two years late, the penalties can start adding up very significantly. Business owners also know that the interest is also accrued on the outstanding balance at 6% per year in addition to the penalties. I understanding this, business owners should ensure that they are working with their accountant to make sure that they never file their taxes late, to avoid the massive penalties that are associated with filing their taxes late.
Business owners need to understand that Canada revenue agency makes it extremely detrimental to businesses to file their taxes late says outsourced CFO, so business owners should work closely with their chartered professional accountant to ensure that they meet all of their filing deadlines, in order to avoid paying penalties. Since 50% of all entrepreneurs are out of business in five years, and plan percent of those entrepreneurs will cite that they ran out of money is a reason for their business failure. Business owners who incur penalties because of late filing, make their situation worse on themselves, by incurring penalties that will negatively affect their cash flow situation.
Business owners should understand what the corporate filing deadlines are, so they don’t miss them says outsourced CFO. Corporate taxes are due six months after the corporate year end. However, business owners should understand that interest starts at three months. Even though corporate taxes are usually paid monthly, the interest on those taxes due starts at three months. Interest is extremely small 1%, but penalties are 5% of the entire balance owing and 1% per month, so business owners should file a time to avoid those penalties. If a business owner files on time and can’t pay the amount they owe, they still owe the same amount of interest. By failing to file, business owners the same amount of interest but then add penalties on top of that. There’s no benefit to business owners filing late.
Business owners should also understand when there GST is due for their corporation says outsource CFO. Even though corporate taxes are due six months after., The GST is due three months after the year end. This does not make a lot of sense, because it’s impossible to file GST before a fiscal year end, but businesses should understand that they start accruing interest on their GST much sooner. And when it comes to GST says outsourced CFO, the government is very strict on when to pay that. Since they view it as a trust fund of money that doesn’t belong to the business owner, as well as money that the business owner should have been collecting from their clients, therefore they have it in their business, there’s no reason why business owners shouldn’t be able to pay GST timely.
Business owners have very little options, if they file late, incur penalties and then start getting demand letters from Canada revenue agency says outsourced CFO, however if a business owner is aware that they are late, but CRA hasn’t started sending them demand letters, business owners may often get those penalties waived as long as they contact CRA themselves, and admit that they have filed late. By disclosing that information, and then promising to pay the interest, business owners can often get out of paying those high penalties. This may be a great strategy that business owners can use with their accountant, if they haven’t filed their taxes yet. Here at Spurrell and Associates, we are one hundred percent dedicated to helping our clients. If you need help call us right now!