Outsourced CFO | Penalties For Late Filing
One of the three biggest challenges that most business owners face says outsourced CFO, is running out of money in their business. Business owners who are short on cash often believe that they can increase cash flow in their business, simply by delaying filing their taxes. However, not only does this strategy not work, but it actually ensures that business owners get penalties on top of their taxes, which not only doesn’t help their tax situation, it makes things worse by adding penalties on top of what they already owe.
If business owners understood what the late charges were for simplifying their taxes late, they would avoid filing late, in order to avoid these penalties. Too late once on taxes, business owners must pay 5% of the balance owing, +1% per month. This is on top of the trust, which interest on the outstanding balance is 6% per year in addition to the penalties says outsource CFO. If they are more than a year late, business owners can find themselves on 10% of the balance owing +2% per month. Any additional years that they owe get penalized this increased rate. Business owners can avoid this penalty very easily simply by filing on time.
Business owners may believe that they have to pay their taxes as soon as they filed, which is why they often file late if they can’t afford it, but when it comes to corporate or personal taxes, CRA will be able to work with business owners to ensure that they can come up with a payment plan that works for them. Since filing on time doesn’t mean that they have to pay immediately, should be enough that business owners avoid filing thanks says outsourced CFO. Business owners will be paying interest regardless if they pay on time or late, so interest charges should be determined as well to filing. The only thing that business owners do filing late, is incur penalties.
Business owners need to also understand what the deadlines are for filing, in order to ensure that they don’t file late. Outsource CFO says that corporate urines are due six months after the businesses your end. If the year end December 31, June 30. Business owners will start accruing interest on the amount that they owe at the three month mark, regardless of if they file on time or late. Although corporate taxes are often paid on a month-to-month basis, the interest on taxes due begin at three month mark. Business owners shouldn’t be frightened by that interest charge, because it’s only at 1%, so it’s a small amount. It’s the penalties that are extremely high so business owners should file on time.
By understanding when they need to file, and what the penalties are for filing their taxes late, business owners can avoid running into the problems that will cause them to run out of money and perhaps their business permanently, or even end it says outsourced CFO.
There are many challenges that business owners face when they are operating their own business says outsourced CFO. There are three top reasons why businesses fail that include being able to attract customers, not able to hire the right employees, and running out of money. Business owners that are in danger of running out of money, often try several things in order to increase the cash flow in their business. One strategy that businesses sometimes attempts, is filing their taxes later, so that they don’t have to pay taxes their hopes by doing this, is that they can increase their cash flow long enough, to generate more sales, that they will be able to pay their taxes with. Unfortunately, this strategy never works, because the simply by filing their taxes late, they incur massive penalties, that are far worse to their bottom line than if they filed on time.
The first things that business owners need to understand, when it comes to filing their taxes, is that they don’t have to pay their taxes as soon as they file them. It is best practices, but outsourced CFO says that there are things they can do in order to help pay those taxes if there wanting to cash flow problems. A business owner should be able to contact the revenue agency, and work out a payment plan in order to pay for their taxes. By working out a payment option, business owners can drastically improve their cash flow, without incurring penalties.
The penalties that they incur are very large, and can damage the cash flow in the business so much that they could potentially have to shut their business down. Simply by filing late, which means there filing more than six months after their fiscal year end, they can to incur penalties of 5% on the balance owing plus 1% per month. If they owe more than a year late, the additional years that they owe penalized at 10% of the balance owing and 2% each month. Business owners also accrue interest on their outstanding balances, which is 6% per year in addition to the penalties. So business owners should easily be able to see says outsource CFO, that filing late far worse option for them.
Business owners also need to realize, that whether they pay late, or in time, they are going to be paying interest only. The interest starts from the day they start owing, not the day they file. Outsourced CFO says that that means that businesses start only interest three months after their fiscal year end, even though their tax return isn’t do for another three months after that. The interest is very minimal, 1% per year on the amount that they owe. So business owners should not be afraid of the increased charges will get by filing late, they should be scared of the penalties.
Once business owners will the detriments of the filing late, they can work with their accountant to ensure that they never file late on their business, so they never get hit with interest charges. Our only goal is to help you and your business grow.