Owing taxes is bad enough (and unfortunately an inevitable part of doing business), but being penalized by the Canadian Revenue Agency (CRA) and having to make additional payments definitely makes your financial pain even worse. So, how do you avoid paying the CRA more than necessary? It’s simple: don’t be late.
When it comes to money owed, the CRA isn’t lenient. There are, however, different penalties with varying degrees of severity, depending on whether you’re late to file your returns or if you’re late to pay the amount you owe.
Types of CRA penalties and how to avoid them
Interest fees: If you fail to pay any taxes owed by the deadline, the amount you owe will be subject to interest fees.
Late-filing penalty: If you fail to file your returns or remittances on time, the amount you owe will be subject to a late-filing penalty, in addition to the interest fees. These penalties are even more severe when you’re late in filing HST or payroll deductions because these types of deductions are money that you’re holding in trust for the government.
How do you avoid these types of penalties? This is so important that we’ll say it again: don’t be late! If for some reason you don’t have enough cash flow to pay the amount you owe on time, make sure you still file by the deadline. While you’ll still have to pay interest on the amount owed for every additional day that you’re late, at least you won’t be facing a compounding penalty as well. If you’re missing some of the information you need to complete your return, file anyway. This way you’re avoiding the late-filing penalties, and you can add the necessary information in an amendment later on.
If you’re lucky enough not to owe any payments to the CRA, you won’t face any penalties if you miss the filing deadline. However, if you continually fail to file on time, the CRA may see this as a red flag, thus making you more likely to be chosen for a dreaded tax audit.
Your company is growing…but is your organizational structure ready for the shift? Don’t miss our next blog post as we prepare you for restructuring your business.
