June 15th, the tax deadline for sole proprietors and businesses, can be a difficult day.
For some businesses, it just means the inconvenience of filling out more forms, but for others, it may mean an increase in business tax debt that you cannot afford to pay.
If you are unable to pay the tax that you owe, you will have to deal with CRA collections.
Staying on top of your finances is difficult for any business, but if you want to avoid financial issues in the future, it’s important that you stay on top of business tax debt.
Unfortunately, a lot of businesses make simple mistakes with their tax planning that lead to a lot of business tax debt.
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Common Business Tax Debt Mistakes
One of the most common mistakes that business owners make is estimating their business tax and HST bill, but failing to put the money aside throughout the year.
They assume that they will be able to pay when the time comes, and when they can’t, they find themselves with a lot of business tax debt.
Many businesses assume that they will be able to pay because they make mistakes when calculating their deductible expenses and overestimate by a lot.
This means that their business tax bill is a lot higher than they expected it to be and they don’t have the money there to pay it.
It’s also important to remember that business revenue may change towards the end of the year, and any change can lead to increased business tax debt that you are unable to pay.
If you are going to manage yourv tax debt effectively, it’s important that you start setting money aside early and prepare for a larger bill than you were initially expecting.
If you are unable to pay your business tax debt, you will have to deal with CRA collections, and they are not willing to wait for their payment.
There is no grace period involved, which means that you will have a large business tax debt to pay right away.
Some business owners think that they can reduce the corporate tax burden by leaving their tax returns, but this is never a good idea.
It is not illegal to have an outstanding tax debt, but if you fail to file a return at all, that is tax evasion and you will be subject to fines and penalties, and potentially even prosecution.
If you delay filing, your business tax debt will only grow larger and be a lot harder to pay.
How to Deal With Corporate Tax Debt
If you are struggling with business tax debt and you are unable to pay what you owe, it’s important that you consider some of the different debt relief options, like bankruptcy or consumer proposals.
We can provide you with all of the expert advice that you need to make the right decisions about your business tax debt and potential debt relief options.
If you find yourself in a difficult position, get in touch today.
You can reach us by phone or fill out an evaluation form and we will get back to you.