Outsourced CFO | How Entrepreneurs Can Avoid Penalties On Tax Filing
Many business owners who are running into cash flow problems in their business, often believe that by delaying when they file their taxes, can help them deal with that constrained cash flow, but it often backfires on them says outsourced CFO. Filing taxes late means that they run the risk of getting penalties from Canada revenue agency that will make their cash flow situation far worse. Jim Collins, the author of six books has been quoted as saying, ìyou must maintain unwavering faith that you can and will prevail in the end, regardless of the difficulties, and at the same time, have the discipline to confront the most brutal facts of your current reality, whatever they might be.î Business owners should have the discipline to do the right thing, in order to keep their business on track.
People should understand what the penalties are for filing personal as well as corporate taxes late once, and multiple times. Outsourced CFO says both are corporate and personal taxes, penalties for filing late is being assessed 5% of the balance owing plus 1% each month. If they are late filing multiple times, they will get a penalty for each year after the first, at 10% of the balance owing and 2% each month. This amount adds up fast, especially depending on how much they owe in taxes. People also need to understand, that there is interest on top of the outstanding balances that is 6% per year.
People should file their taxes on time, regardless of if they donít have the money to pay the taxes that they owe says outsourced CFO. The reason for that, is that by filing on time, they can save the penalties. They will be assessed the same amount of interest that they would have regardless of when they file, but they will not get assessed additional penalties, which will make them even more money to CRA. If they are already have a hard time paying money that they do owe, having to pay more just adds to their problem. File on time and avoid penalties.
People should keep in mind the two dates that personal taxes are required to be filed by. People need to understand that almost everyone has the same filing deadline of April 30. However, outsource CFO says if a person or their spouse has unincorporated business, they have a different deadline which is June 15. Business owners who have unincorporated business, should know that even though they have a month and half later filing date, they will start getting charged interest from April 30.
By understanding what they need to keep in mind, and filing their corporate or personal taxes on time people can avoid paying the penalties associated with filing taxes late Says outsourced CFO. This is extremely important, especially for business owners who tend to run into problems with cash flow, their cash flow problems will be made far worse by not filing on time.
Business owners who are short on cash, believe that by filing their taxes late can help them increase their cash flow for a number of reasons says outsourced CFO. Unfortunately, all that filing late does is trigger penalties for business owners that make their cash flow situation go from bad to worse. Since 29% of all entrepreneurs who close the doors to their business said that cash flow was the reason their business failed, incurring additional penalties will just make that cash flow problem exacerbated.
Business owners should understand what the deadline is for filing their corporate taxes. Regardless of when there fiscal year end is, business owners must file their corporate taxes no later than six months after that fiscal year and says outsource CFO. This is a great opportunity for business owners to strategize with their accountant in order to plan when there fiscal year end should be. There are many different reasons why choosing the fiscal year end the accountant makes a big difference. Many business owners believe that their fiscal year end is chosen by being 12 months after the date that they incorporated, or after they get a GST number, but this is untrue.
If a business owner has not filed their corporate taxes before, and itís been longer than 18 months since they started their business, they may be incurring penalties, but if they have not yet filed corporate tax return, then they havenít officially chosen a fiscal year end, and they can use that in order to strategize and how to minimize their penalties. Most entrepreneurs donít start turning a profit in their business for several months. A business owner can make their fiscal year end be the month before they started making money in the business. This way, if they made no money they will owe no taxes, and the penalties for filing late is 5% of the balance owing. If the balance is zero, there is no penalty. This way, businesses can strategize when they can file in order to maximize their cash flow.
Another deadline that business owners should keep in mind when they are filing their taxes is when there GST is due. Outsourced CFO says that corporate GST is due three months after the corporate year-end. This can sometimes be difficult, because that deadline means that itís due three months before the corporate taxes are due. Again says outsourced CFO this is where business owners should work with their accountant in order to be able to pay their GST before they file their corporate taxes.
There are several reasons that filing corporate taxes late can be a detriment to businesses, they should avoid penalties simply by filing their corporate taxes on time. Canada revenue agency will allow business owners to enter into a payment plan for taxes that are in arrears. Both personal and corporate payment plans can be up to six months, while GST arrears need to be paid in three.