Outsourced CFO | Filing Taxes Late Not A Great Cash Flow Strategy
There are many reasons why business owners may have cash flow issues in their business says outsourced CFO. In fact, itís one of the top three reasons why businesses have said their business failed. Many business owners try increasing the cash flow in their business through a variety of different methods, however filing their taxes late in order to help increase their cash flow is not a method that works.
One of the biggest reasons why filing taxes late is not an effective strategy to increasing cash flow, is because of the penalties that are associated with filing late. Business owners who are late filing their personal or corporate taxes get assessed penalties that is 5% of the taxes that they owe and 1% each month. If they are late filing more than one year, business owners will get a penalty of 10% of the taxes that they owe as well as 2% each month. These penalties can add up extremely fast, especially if a business owner owes both corporate and personal taxes. Then, outsourced CFO says businesses will also get interest on top of the outstanding balances. This is 6% per year interest that is in addition to the penalties that they incur. These additional penalties will cause a business owner to oh far more money to Canada revenue agency then they would have if they simply filed their taxes on time.
If businesses want to significantly impact their business in a positive way says outsource CFO, all they have to do is instead of filing their taxes late, is contact Canada revenue agency to work out a payment plan. CRA will allow business owners, as well as people who are owing personal taxes payment plans in order to help ease the burden of paying those taxes. For personal and corporate tax arrears, CRA can also people to pay that they owe over the span of six months. Businesses that owe GST, can also call Canada revenue agency in order to get a payment plan says outsourced CFO. However, the payment plan that Canada revenue agency will allow for businesses is only three months. These payment options can help increase the cash flow enough in the business, to have them avoid problems, while filing on time to avoid penalties.
Sometimes, business owners believe that by filing their taxes late, they can eliminate interest charges says outsourced CFO. Many people are mistakenly believing that they start paying interest on the taxes that they owe the day that they file the taxes. Unfortunately, business owners start accruing interest on the taxes that they owe three months after their year end, and not from the time of filing. By filing late, theyíre not saving any taxes, and they are incurring penalties that can make their situation worse. The interest that they incur is only 1% per year on the entire amount they owe. that amount is so small, but itís not worth worrying about. They can either incur interest at 1%, or get penalized at 5% plus.
Entrepreneurs who need to increase the cash flow in their business should never utilize filing their taxes late as a way to increase the cash flow says outsourced CFO. The reason why business owners may attempt this strategy, is because they are unable to pay their taxes at the time of filing, so they believe that if they can file their taxes later, will be able to generate the money that they need in order to pay all this does, is makes a business owner incur penalties on top of what they already owe, which will make their cash flow situation worse.
If business owners do not have the money on hand to pay their corporate taxes immediately, they can always contact Canada revenue agency in order to work out a payment plan. These payment plans can give a business owner up to six months in order to pay their corporate tax arrears. Sometimes, all business owners need in order to positively impact their cash flow, is to come up with a payment plan says outsource CFO. By utilizing this payment plan, business owners can start paying their corporate taxes, and avoid penalties.
Business owners need to have their corporate taxes filed six months after their corporate year end. Whenever they have chosen their year-end to be, they should keep in mind that their tax filing is due six months later. This also keep in mind that there GST also has unconditional due date. There GST is due three months after their fiscal year end. Business owners need to be working with their accountant in order to come up with strategy that allows them to pay their GST on time, which is three months before their corporate taxes are due says outsource CFO.
If business owners are in arrears on their GST they also can work out a payment plan with Canada revenue agency says outsourced CFO. Unfortunately, they are less lenient on being owed GST, because they view GST funds as a trust fund, that a business owner was collecting ahead of time in order to give to the government. Since the business owner had been collecting it, they should have it, therefore CRA looks a little less favourably on business owners that collected GST at the time of doing business with their clients, but then instead of paying it to the government, or using it in order to help from their business. Business owners should work very carefully in order to ensure that they donít fall behind on their GST payments, because it is much harder to avoid penalties.
Outsourced CFO says it takes just a little bit of planning in order for business owners to avoid running into problems because of late filing their taxes. It is not a good strategy to file taxes late in order to increase cash flow in their business.