Outsourced CFO | Why Businesses Shouldn’t File Taxes Late
A method that some entrepreneurs may use in an effort to increase the cash flow in their business is filing taxes late says outsourced CFO. They believe that since they can’t pay their taxes at the time of filing, or that it would be a financial hardship to pay their taxes at the time of filing, that simply by filing late, they can delay when the pay those taxes, and increase their cash flow for the limited amount of time. Unfortunately, this doesn’t work because the penalties that business owners owe on a daily late, are so high that it can be more of a financial burden to business owners to pay those penalties in addition to the taxes that they owe.
Business owners should understand what the penalties are for filing late, so they can see why this strategy doesn’t work. By being late on filing their taxes the first time, business owners must pay 5% of the balance that they owe and in addition to that one person per month. Business owners owe more than one year behind in taxes, for every year that they are late, they’ll have to pay 10% of the balance owing as well as 2% per month. This amount fast says outsource CFO, and added to that is the interest charges on the outstanding balances which are 6% per year on top of the pit of these. These late fees should be a deterrent for business owners to completely avoid their taxes late.
The reason that business owners would want to file taxes late, is because they either cannot or don’t want to pay their taxes at the time of filing, because it would be a financial burden, or they simply don’t have the money says outsourced CFO. However, even if business owners cannot pay their taxes at that time, they should file on time to avoid the of days. Entrepreneurs can contact the Canada revenue agency, and work out a payment plan for paying arrears in personal as well as corporate tax. CRA will allow business owners to take up to six months to pay their personal or corporate taxes, so even if business owners are not able to pay their taxes in full right away, that should not keep them from filing late says outsourced CFO. In fact, business owners that are having cash flow problems may find that this payment plan with CRA is enough to keep them out of the cash crunch that they are experiencing, which means not only do they will have to file late and get the keys, but they will be able to use the payment plan to help their situation.
Once business owners understand the penalties for filing late, as well as what options they do have for paying the Canada revenue agency, they will think twice about missing filing as a way of increasing cash flow. Business owners should work ahead of time with their accountant in order to minimize cash flow, and use tax planning to avoid paying taxes to help increase the cash flow in their business.
There are three main reasons why entrepreneurs end up closing the doors to their business within five years says outsourced CFO. 42% said that they weren’t able to attract customers, 29% said that they ran out of cash and 23% said they were able to find the right employees to work in their business. As an extremely high percentage of business owners that close the doors to their business because they weren’t able to have positive cash flow in their business. Some business owners believe that if they are having cash issues in their business, that they can file their taxes late in order to help increase their cash flow, because they won’t have to pay their taxes until later. By not paying their taxes on time, they can use that money to help increase the cash flow until he generate enough revenue to actually pay their taxes.
This is not a strategy that works, because not only do business owners get hit with steep penalties if they file late, they also can work out a payment plan with CRA to help them pay their taxes over a six-month period, which may be all that a business owner needs in order to avoid cash flow issues. Outsource CFO says that by understanding the filing deadlines, business owners can ensure that they avoid all of these issues and avoid paying higher penalties for late filing.
The deadline for personal taxes is April 30 of every year for almost everybody says outsourced CFO. The only exception to this our business owners who own unincorporated businesses, and that filing deadline is June 15. Even though they have a different deadline, they start accruing interest from April 30. The corporate filing deadline is six months after the businesses fiscal year end. Regardless of when that your end is, they will have to file six months after that. If there fiscal year and is May 31, November 30 is there filing date. Even though corporate taxes are due six months after the fiscal year end, business owners need to be very clear that there GST is actually due three months after there fiscal year end. This means that there GST is due three months before their taxes are due. Despite the fact that this creates logistical problems for businesses as well as the Canada revenue agency, this is something that businesses need to keep in mind to avoid paying GST late.
Outsource CFO says that business owners should understand that they can work out a six-month payment plan for personal and corporate arrears with CRA. If they are having problems paying their taxes, that is always an option that they can work on. There is also a payment plan for GST arrears, however, that’s only a three month payment plan, because there should be less of a reason for business owners to not to be able to pay GST. You will not find any better outsourced CFo anywhere in the Edmonton area.