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Business owners should understand that there are penalties for filing late. Business owners that are late one time pay a penalty of 5% of the balance owing, and 1% per month says outsourced places CFO. However, if the business owner files late multiple times, for instance they have missed filing two or three years in a row, after the first year they will incur a penalty of 10% of the balance owing, and 2% per month. Even if a business owner has never filed before, and they are two years behind, they will all penalties on both years. These penalties can add up extremely fast. The interest that is charged on the outstanding balances is 6% per year in addition to the penalties. Outsource CFO says that this is an increase from 5%.
The reason why entrepreneurs should file on time, even if they don’t have money to pay is because they will have to pay the interest anyway because the interest starts from the day the business starts awaiting, not from the day they file. Therefore, a business owner is not saving themselves money, helping increase their cash flow by filing late. All they are doing is incurring penalties. Business owners can automatically save 5% just by filing on time, even if they have no money to pay. While on time, and get rid of penalties. This way, business owners should avoid to increase cash flow, because it just won’t work.
One way that business owners can minimize the penalties that they are paying, even potentially eliminating lump completely says outsourced CFO, is through voluntary disclosure. If they know they are filing late, but CRA has not yet started to send them letters or phone calls saying that they are late, business owners can approach CRA, and voluntarily disclose that they are late, and hopes to eliminate the penalties. This often works, because CRA will waive penalties for business owners who voluntarily disclose. This only works, if business owners have not started getting demand letters from CRA. This can be an effective strategy for a business owner that knows they are late, and wants to avoid paying penalties.
Business owners can make their situation better for themselves, by paying on time always, even if they don’t have any money, because the penalties for filing late is huge, and can make a bad situation far worse for the business owner says outsourced CFO.
Business owners who need to increase their cash flow because they are short on cash, often believe that by filing their taxes late, they can help themselves increase cash flow says outsource CFO. This is not an effective strategy because filing late, even one time will end up causing the business owner larger penalties in their business that will absolutely make their cash flow situation worse. Even if business owners cannot pay their taxes, they should always file on time in order to avoid having to pay more later.
There are two dates that entrepreneurs need to keep in mind for filing their personal taxes. Outsourced CFO says that April 30 is the deadline for all people including entrepreneurs of corporations. However, owners of unincorporated businesses have a tax filing deadline of June 15. Entrepreneurs need to be aware however says outsource CFO that CRA will start charging interest from April 30 even though there is a leader filing deadline. Business owners can use this later filing as a planning opportunity because the threshold for the proprietorship is much lower. Most people can claim that they have the proprietorship. Did they make any money whatsoever outside of their traditional business, or their job? Do they mow a friends lawn for $50? That can be enough for them to be able to claim that they have a proprietorship. Any additional money whatsoever that was made outside of the corporation is what’s needed to claim a proprietorship and utilize the June 15 tax filing deadline.
The tax filing deadline for incorporated businesses is six months after the fiscal year and says outsourced CFO. However, the interest starts at three month mark. Even though corporate taxes are usually paid on a monthly basis, the interest on those taxes due starts at three months. That interest is 1%, so it’s small. It’s the penalties that are high, so business owners need to file on time in their corporate year-end to avoid paying penalties.
Business owners who know that they are late, but have never filed their year end before can use this as a planning opportunity says outsourced CFO. Many entrepreneurs believe that there fiscal year end is set by the date that they incorporated, or the date that they got a GST number but that’s not true. There year and is actually when they file their taxes. Businesses that have not yet filed their taxes, but have been in business for longer than a year, can strategize to minimize their late penalties. If they weren’t making any money for the first few months, they can make their corporate year-end be the last month that they weren’t making a profit. They will all penalties on their first year, but the penalties of 5% of no profit is zero, so by utilizing this method, is owners can avoid paying penalties on the first year, and only oh on the second year. By using voluntary disclosure, business owners can even waive the penalties on the second year. Whatever the accounting or financial issues you are facing this year. The professionals want to help. So do not wait to give us a call.
