Although most Canadians file their taxes on time, at least 27 million eligible taxpayers miss the April 30 deadline, according to the Canada Revenue Authority (CRA). The problem with filing taxes late is you are likely to end losing money. On the other hand, when you pay your taxes on time, you are likely to enjoy the following tax incentives that will ultimately save you money:
Refunds
The odds of receiving a tax refund when your file your taxes on time are normally quite high. In fact, figures published by the CRA show that almost 60% of taxpayers received an average of $1,500 in refunds in 2011, which is quite a substantial amount of money that you can either invest or use to pay off some of your other debts.
Credits
Filing taxes late increases the risk of losing substantial tax credits. In Ontario, for example, businesses can use the Ontario apprenticeship training tax credit to settle their wage bills. The program offers up to $10,000 to supplement salaries of apprentices working in industries such as construction. For businesses engaged in high tech or manufacturing industries, scientific and experimental development (SR&ED) tax credits can help the business develop new products. Figures published by the CRA show that the tax credits could be worth as much as 35% of a private business’ expenses. All of these tax credits can add up to big savings for any SMB.
Deductions
Rushing to file your taxes at the last minute typically increases the likelihood of missing important details. For example, you might forget to claim deductions that you should include in your tax returns. For that reason, you should hire tax services Toronto experts to handle your tax returns, ensure you claim all deductions, and maximize your refund.
Avoid Interest Penalties
Another benefit of filing your business taxes on time is avoiding paying costly penalties. Remember SMBs must clear file tax returns within six months after the end of their fiscal year. The CRA normally penalizes businesses that fail to comply to this directive with three months of interest on their outstanding taxes. The same is true for entrepreneurs running non-incorporated or private incorporated businesses.
Auditing
An audit by the CRA can have a negative impact on your business if you are planning to raise money from venture capitalists or angel investors. Although the CRA published new guidelines to help businesses keep track of expenses, it is wise to separate business and personal expenses. For example, traveling from your home to your business premises does not qualify as a business expense. Furthermore, only 50% of eligible expenses are deductible. By keeping an accurate account of expenses, you will avoid triggering CRA audit red flags.
Despite the fact that running a business can be a big challenge, businesspersons in Canada need to file tax their returns on time in order to enjoy certain tax benefits including refunds, tax credits, deductions, and avoid costly penalties. Detailed and accurate records tax records will also come in handy as you grow and expand your business.
About the Author
Sam Moser is a freelance web content writer who graduated from the School of Journalism at Ryerson University in Toronto, Canada. When he started his small business, he always hired Hogg, Shain & Scheck chartered accountants to help him file his taxes.
