What You Need to Know About Late Tax Filings in Canada
The deadlines for filing taxes differ based on which fiscal year the company falls under. Here in Canada, corporate taxes make up the second largest source of tax revenue at 15.2%, making it an essential source for funding the government.
However, as a business, calculating your tax liability is a daunting task. There’s a lot more technicalities and paperwork involved which makes it a time consuming process. Often businesses find it difficult to get done with tax filing on time. Late filing of taxes or neglecting it all together is never a good idea as it has severe implications on the business.
Here are some consequences of failing to file tax returns in time:
Late filing penalties
Tax returns are expected to be paid within 6 months after the tax year is completed. When businesses fail to comply with this timeline, penalties will be levied on your business. The penalties are determined depending on the number of months the payment has been delayed, with a maximum of 40 months.
For large corporations, penalties on late payment includes 0.0005% of taxable capital employed plus 0.25% of tax payable.
if you hold off on filing taxes for too long, the agency will file a substitute return on behalf of your company. Although this prevents the failure to file penalty, it ensures you can no longer claim any deductions and exemptions.
When a substitute claim is filed, the revenue agency can engage the services of a collections service to do their job.
Decreases your chances of obtaining financing
Filing your taxes late or not filing it at all is a black mark against your business in the eyes of the revenue agency here in Canada. This can affect your business negatively by affecting its ability to qualify for loans. When you apply for a loan, lenders ask for tax returns to verify the revenue stated. Failure to provide this document means you can’t backup your claims and the loan application will get rejected.
If your business doesn’t files its taxes late, it’s considered a red flag by lenders. They will most likely assume that you will default on their payments too. Credit reports are affected as a result of late filing of taxes too.
If you’re looking for help with your company’s taxes, our experts can help you out. We provide compliance services include corporate income tax preparation, tax planning, accounting services, financial statement compilation, bookkeeping services, and more! We even provide customized programs to help you manage your business and meet regulatory deadlines.
Get in touch with our tax consultants in Edmonton, Alberta today!