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Outsourced CFO | How Businesses Get Penalized For Filing Taxes Late
Many business owners don’t understand what the penalties are associated with filing their taxes late says outsourced CFO, and as a result they violate as a way of helping their cash flow situation because they aren’t able to pay their taxes immediately. But instead of helping their cash flow situation, business owners who are short on cash and file their taxes late, end up dealing with massive penalties on top of the amount they already owe. Business owners should avoid filing late at all costs, in order to avoid these days. Canada revenue agency will work with the business owner on a payment plan that can be made up for corporate tax arrears, which can help business owners address their cash flow crunch, without accruing huge penalties.
Business owners should understand what the penalties are for late filing, in order to remind them of why it’s a bad idea to violate says outsource CFO. Businesses that are late filing by a single year, will 05% of the entire balance owing, and then an additional 1% per month. This is on top of the interest that is owed on the outstanding balance, which is 6% per year in addition to the penalties. Business owners that are late for more than one year, get hit with a penalty of 10% of the balance owing and then to percent per month in addition to the interest of 6% on top of the outstanding balance. Every year that they are late after the first year gets hit with that same balance so year three you will have 10% +2% per month, year for will get 10% of the balance owing +2%. Business owners should be aware that these interest charges add up fast, and are completely avoidable simply by filing taxes.
Business owners think that they violate, that delays the taxes that they owe but this is not true. Not only do they owe the taxes from the date that they should have filed, they also start accruing interest charges based on that filing date as well. Business owners will always be able to make their situation of cash flow better simply by filing their taxes, even if that means that they cannot pay right away. It will be a lot easier to work with Canada revenue agency in order to come up with a payment plan, if the payment plan does not include having to also pay additional penalties says outsourced CFO.
The filing deadline for corporate taxes is six months after that businesses fiscal year end. Business owners should understand that the interest starts at three months. Even though corporate taxes are usually played every month, the interest on taxes due starts getting accrued at the three month mark at 1%. The interest is a very small amount, so business owners shouldn’t fear that. It’s the penalties for late filing that are high says outsourced CFO. Late filing should be avoided at all costs.
Entrepreneurs who file their taxes late, get hit with such massive penalties, it can drastically impact the cash flow in their business to a point where their business cannot recover says outsourced CFO. Since 50% of all businesses close their business within five years, and 29% of them say that the reason their business failed was because they ran out of money. Since cash flow issues are huge problem for businesses, entrepreneurs should avoid getting hit with the penalties because that can contribute to the reason why they would run out of money in their business. Business owners should not risk having to close their business now simply for incurring charges that were entirely avoidable in the first place.
Business owners should understand that they can work with the Canada revenue agency to come up with payment plans for the amount that they are in arrears for the personal and corporate taxes. They should avoid trying to increase cash flow in their business by filing late, because what can more positively impact their cash flow, is coming up with a payment plan that works for them as well as CRA. Outsource CFO says the penalties for filing late are extremely high, and even if they are able to get a payment plan the CRA, that payment plans will be much harder if they have been hit with penalties first.
Something that business owners should keep in mind however, if they had missed their filing deadline in an effort to save money, but then realized error, they will be able to approach CRA, and voluntarily disclosed to them that they are late says outsourced CFO. If CRA hadn’t already started sending that business demand letters, penalties for the business owner. This can be a good strategy for all business owners who have yet to file, and want to avoid penalties.
Something that business owners should keep in mind however, is if they are late with their GST, CRA is much less forgiving. The default time to pay is three months. The reason why they are less forgiving says outsource CFO, is because they view GST funds as a trust fund. That’s money that does not belong to the business owner, that they were collecting on behalf of CRA. Since they collected that money ahead of time, they shouldn’t have money in their business, they should send it off to the government. So if they pay late, CRA views that as using the government’s money in order to fund their private corporation. Less forgiving on late GST, business owners should be especially sure that they pay their GST friends and on time.
The take away is that business owners even if they are in a difficult situation, start making their situation immediately better as soon as they file their taxes. Outsourced CFO says that gardens of how late they are, or what penalties they may have incurred, the situation gets better when they file, and approach CRA for payment plans. If you are in need of an accountant Spurrell Would love to be the one to help you out in that respect.