Revenue Canada recently put out a press release about a Sarnia businesswoman who pleaded guilty for failing to file 23 individual, corporate and sales tax returns from 2003 to 2009. She ended up being fined $1,000 per count for a total of 15 counts (Penalties were not applied to the 8 outstanding GST returns). She has 12 months to pay the total $15,000 fines and was ordered to file the outstanding tax returns before November 6th, 2011. In addition to this fine, she is also responsible for any taxes payable and related interest and penalties that would be imposed by the CRA for late filing and payment.
As an accountant I frequently receive panicked calls from business owners who have received ominous letters from the tax authorities requesting that overdue tax returns be immediately filed. Others receive notices of assessments for significant amounts (Revenue Quebec will often slap an $8,000 assessment on a corporation that has yet to file its corporate tax returns). In more extreme circumstances, the tax authorities have the power to freeze your bank accounts or initiate tax audits. This can be debilitating to a small business.
Ensuring that you stay on top of your tax obligations is fairly straightforward and the following measures can actually help to contribute to more effective business operations:
- Be aware of your tax reporting, filing and payment alternatives. In Canada a small business and/or self employed individual is potentially responsible for the following returns:
- GST/HST/QST annual, quarterly or monthly filings
- Monthly or Quarterly Deductions at Source if you pay salaries to yourself or employees
- Annual T4 slips and summaries (+ RL-1 slips and summaries in Quebec)
- Annual T5 Slips and summaries if you pay dividends to your shareholders
- Annual Corporate Tax Return, due 6 months after your year end
- Annual personal tax return for unincorporated business
- Income and corporate tax instalment payments
- Hire an accountant to keep on top of all of your obligations and advise you on ways to streamline and simplify the process.
- If you get mail from the government, OPEN IT! It is somewhat amazing to me how many business owners that I have come in contact with don’t actually open their mail at all or when they do, don’t really pay attention to its contents. Keep in mind that CRA and Revenue Quebec will usually send several reminders to file or pay a tax obligation before taking more drastic measures. It is however always best to respond to their requests as soon as possible.
- Don’t hesitate to call the government if you do not understand something. They are sympathetic that the majority owners of business owners are not accountants and tax specialist and are usually quite willing to help guide you through the process.
- Have an effective accounting system and accounting software in place. A good system will assist with calculation of balances due and generation of the necessary reports. In the absence of an accounting system, ensure that you put ALL of your government/tax documents in your shoebox (ideally in a somewhat organized fashion) for your accountant to review at your year end.
- When in doubt, keep any paperwork particularly when it comes from the government and consult with your accountant either right away or at the end of the year if there does not appear to be a deadline associated with the document.
Remember that the onus to be on top of your tax obligations is on you. Ignorance is not an excuse. And although the government is fairly tolerant, they do have enough authority to create significant problems for the business. A simple phone call to let them know that you are top of an overdue tax filing is often enough to stave off more extreme action.