Home » Articles » Outsourced CFO | How Businesses Incur Penalties For Filing Taxes Late
Outsourced CFO | How Businesses Incur Penalties For Filing Taxes Late
When entrepreneurs start getting low on cash, they start thinking, and various ways that they can increase their cash flow, so they can avoid having to close their business says outsourced CFO. One of those strategies may be to delay filing their taxes, in order to increase their cash flow until they do follows taxes. Fortunately, this backfires always, because when a business owner misses their filing deadline, they get with the penalties that make their cash flow situation far worse than it ever was before. There are much better ways that business owners can increase the cash flow in their business, that doesn’t include risking getting penalties.
Entrepreneurs should understand what the filing deadlines are in their business in order to avoid getting hit with late filing charges. But corporate taxes are due six months after that businesses fiscal year end. That means if the fiscal year end January 31, July 31will be the filing deadline. If the fiscal year-end was December 31, the year-end is due June 30. However interest starts getting accrued corporate taxes at the three month mark. The interest is only 1%, so it’s very small. The penalties on the other hand, are 5% of the bill is only one person every month. So it’s extremely important that business owners file their corporate taxes on time says outsource CFO.
If a business owner has not yet evolved taxes, that means they have also not yet set their fiscal year end, and they can use that fact in order to perhaps avoid penalties altogether at the very least demise them. The way they would do this says outsourced CFO is by making their first year and the last month but they did not make any money in the business. Even if they are more than one year late and they you will get penalties on the first year, if they made no money in their first year, then they owe no taxes. These are added onto the amount that they owe, which means 5% of not being owing is still nothing owing. If the business owner is only late by a year, they can avoid paying a penalty altogether. If they own more than one year, they can at least minimize the penalties by not incurring penalties in the first year.
If the business owner is aware that they are late in filing, whoever Canada revenue agency hasn’t started sending demand letters, or floating business owner them know they are late, a business owner can often get the penalties removed simply by admitting to CRA that they are late. This is called voluntary disclosure. CRA often will remove the penalties once a business owner discloses that they are late, but that they promise to file and pay the interest charges. Business owners will not be able to avoid paying interest charges ever says outsourced CFO, so getting the penalties removed is the best situation they will be able to get.
Increasing cash flow is an extremely important goal for all business owners says outsourced CFO. Since 29% of all business owners that failed, say that running out of money was the reason why they had to close their business. There are many strategies that business owners can use proactively in order to increase the cash flow in their business. Unfortunately, if business owners were not proactive, they may find themselves in a dire situation where they are scrambling to increase their cash flow in a hurry. One of the ways that they may strategize to do this, is to delay when they file their taxes in an effort to increase the cash flow in their business. However, instead of increasing their cash flow, they end up being hit with penalties from Canada revenue agency for filing late. Business owners should understand that even if they can’t afford to pay their taxes immediately, they should still file their taxes. They can always work out a payment plan with CRA later, which can help them with their cash flow problem. It’s a lot harder to avoid cash flow problems when they are being hit with penalties.
Business owners should understand what those penalties are, in order to understand fully why they should avoid them says outsource CFO. If business owners are late filing the corporate taxes by one year, they will owe a total of 5% of the entire balance owing, and then incur 1% per month. If they missed filing by more than one year, the subsequent years are 10% of the entire balance owing, and 2% per month. This is on top of the interest. Outsourced CFO says the interest on outstanding balances is 6% per year in addition to the penalties that they received. These penalties are extremely easy to avoid simply by filing their taxes on time.
The reason why they should file on time anyway, is because even if the business owner can’t pay, they will over the interest regardless of when they file, so they are not saving money that way. The interest that they owe starts from the day they start owing it, not the day they file, so they’re not saving any money and at the same time, they’re not incurring penalties. Even if they can’t afford to pay the taxes when they file, they will be able to work out a payment plan with CRA says outsource CFO.
Business owners should also know that there taxes are due six months after their fiscal year and. If they understand when they should pay their taxes, it will make it much easier to file them on that day, avoid being late and not being hit with interest charges that will make their cash flow situation far worse than it already is says outsourced CFO. Business owners also should know that even though they are accruing interest on the taxes that they owe, is only a 1% per year, so it is a lot more manageable than it would be getting hit with a penalty. Here at we are the best accountants you’ll find in edmonton.