How to avoid a CRA late filing penalty and other penalties
When running a business, you have enough on your plate. Particularly for small business owners in Toronto, managing the bookkeeping and taxes is overwhelming. The penalties you incur when neglecting or mismanaging finances cripple operations. Luckily, with the Leonard Tam Professional Corporation, our 25-plus years of industry experience and unrivaled customer service turn working with the CRA into a walk in the park.
Here’s how to avoid CRA late filing penalties and more:
File your taxes on time
The surest way to avoid a CRA late filing penalty is to file your taxes on time. However, many businesses still file late due to mismanagement and disorganization.
If you file your return late, you will be penalized 5% of the unpaid tax, with an additional 1% each month the return is late for up to 12 months. Even if you’ve incurred a penalty, it’s crucial to avoid compounding it.
Failing to address late filing penalties by filing your taxes immediately results in further penalization. Plus, should you fail to file your taxes any of the previous three years, you’ll be penalized 10% of the unpaid taxes.
In addition to the 2% of the unpaid tax for each full month for up to 20 months, this is an exorbitant cost for procrastination. Filing your taxes on time will ensure you avoid these penalties. The longer you wait, the more severe the penalty becomes.
Luckily, with Leonard Tam, we will manage your books, be on top of deadlines, and guarantee everything is filed precisely when it needs to be.
Report your income
It’s also crucial that you report your income. To prevent a CRA late filing penalty, your company has to report income equal to or greater than $500.
While there are some circumstantial exceptions, the penalties you incur for failing to do so are sizable. Firstly, this penalty will be 10% of the unreported income or 50% of the difference between the understated tax payable and the amount you failed to report.
Reporting your income is essential. However, to truly understand if you’re liable or if this penalty is inapplicable due to subsection 163(2), it’s imperative to have competent counsel to ensure you report everything on time.
Fortunately, at Leonard Tam, we’ll report your income if it’s required so you avoid hefty penalties.
Never provide false statements, omissions, or misrepresentations
A critical way to eschew a CRA late filing penalty is to ensure the information you provide is factual. Should it be untrue, whether it’s knowingly or due to negligence, you will be penalized.
The penalty for this offense is $100 or 50% of the amount of the understated tax. The amount comes down to whichever one is greater. Moreover, should a third party misrepresent your tax situation for you, this can also be severely penalized.
If your consultant advises you to or helps you file false information, you will be penalized. Alternatively, if a third party knowingly allows you to submit false information, you will also be penalized. Honest and responsive counsel is crucial when filing your taxes.
Schedule a free consultation now!
If you’re running a small business, you can’t afford to incur a CRA late filing penalty. These devastate operations and stunt growth. Luckily, with Leonard Tam Professional Corporation, we’ve been servicing the Toronto area with premier, strategic tax and finance counsel for over 25 years. We pride ourselves on unrivaled customer service, round-the-clock availability, and a commitment to helping customers flourish. Schedule a free consultation now! We'll turn the CRA from a boogeyman into a valued partner.