Outsourced CFO | How To Avoid Paying Tax Deadline
Business owners have many challenges that face their businesses every single day says outsourced CFO. If they are not being proactive on how to avoid cash flow problems in their business, they may end up in a situation that has them panicking, and utilizing ineffective and inefficient strategies. One of those strategies is often leaving that they can save money by filing their taxes late. They think that by filing their taxes late, the money that they normally would have sent into the government to pay their taxes, they can use for a few additional months to help them generate cash flow in their business. This is an extremely bad idea, because no amount of revenue that they generate can make up for the fact that filing late brings swift penalties to business owners, that may be difficult or impossible to recover from.
If business owners have not taken care to work with their accountant on efficient strategies on how to minimize cash flow problems, they can find themselves in a lot of trouble. If they thought that filing their taxes late was a great way to save money, and then realized too late that it was maybe a bad idea. Business owners may be able to eliminate their mistake if they act fast enough says outsourced CFO. If business owners are aware that they filed late, but Canada revenue agency doesnít know yet, or at least they havenít started sending demand letters or making collection phone calls, business owners can utilize what is known as voluntary disclosure. What this is, is that a business owner will approach Canada revenue agency to admit to them that they know that they are late. If they file immediately and pay applicable interest, they can ask Canada revenue agency if they will eliminate the penalties for them. Itís at CRAís discretion whether they accept that are not, but often CRA will accept thi business owners can avoid that mistake, if they are able to act fast enough once they have realized the error of their ways.
Brand-new business owners who have not yet filed their corporate taxes, but havenít filed in a significant amount of time can strategize with their accountant on how to avoid penalties. Outsourced CFO says that if a business owner has operated their brand-new business for 18 months, and was not turning a profit in the business for the first 11 months, they can make their corporate year end coincide with the last month that they didnít make a profit. This way, businesses that donít have profits, donít owe taxes. If they do incur penalties, the penalties are 5% of what is owing plus 1% per month. 5% of nothing is zero. So even though they may incur penalties, they wonít actually have to pay anything. Many entrepreneurs donít realize that they can actually set any date they want as their corporate year end. It doesnít need to coincide with when they incorporate or when they get it GST number.
Entrepreneurs who believe that they can minimize cash flow problems by delaying filing their corporate taxes, end up with worse problems than what they first started says outsourced CFO. Itís like Jim Collins has been quoted as saying, you 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. If business owners can confront the brutal facts of their current reality, that they are having extreme cash flow problems, which threatens to shut down their business, then they can begin to work out solutions that will help them prevail in the end, regardless of those difficulties. Avoiding filing taxes is not the way to do that.
Regardless of the reason why business owners think that itís beneficial to avoid filing taxes, thereís several reasons why this is a bad idea. On filing a loan are astronomical says outsource CFO. Business owners that are late filing, incur late penalties that 5% of the taxes that they owe plus 1% per month. If they are more than one filing in the rear, for every year that they havenít filed, the business owner has a penalty of 10% of the taxes that they owe plus 2% per month. Not only does this add up extremely fast, especially depending on what they owed in the first place, business owners need to understand that there is also interest that they are now accruing on top of the outstanding balances. The additional interest is 6% per year in addition to the penalties. Business owners that are having cash flow issues in their business may find this is too hard for them to bear. And businesses that were not having cash flow problems before this, might find themselves having significant cash flow problems now.
Entrepreneurs may avoid filing taxes, because they think somehow that they are saving interest says outsourced CFO. However this is also incorrect thinking. Business owners actually start owing interest three months after their fiscal year end. Which actually is three months before their corporate taxes or even do. However, business owners should be aware that the interest that they accrue on taxes that are not late, is only 1% per year. Itís such a tiny amount, that fear of paying that amount shouldnít cause them to avoid filing taxes at all.
Entrepreneurs should make doubly sure that even if they canít pay their corporate taxes, that they absolutely do not miss paying their GST says outsourced CFO. GST is due three months after their corporate year end, which is again three months before their corporate taxes are due. Business owners need to understand, that CRA takes an extremely stern look at business owners that will pay GST on time. The reason for this is because that is technically the governmentís money, to not pay that on time can be very detrimental to businesses.