Tax Compliance
Every business owner knows that you have to file documents with the Canada Revenue Agency. Some business owners will know their filings, when they are due, and what they mean. But the majority of owners will find a bookkeeper or accountant to get it done.
In some cases, the necessary filling will be ignored. This could happen for a number of reason, but these tend to be the most common.
- Bookkeeping is not complete
- No knowledge that it needs to be done
- Owner doesn’t know how to approach it
- Owner doesn’t have the money to pay Canada Revenue Agency
In any of these cases, it is crucial that the owner understand that any of these can lead to compliance issues.
What is compliance?
Compliance is making sure that your CRA obligations are filed on time. This does not mean that they are paid. CRA always wants to know that your business has reported the appropriate income, you have filed the appropriate taxes, and that you have the ability to pay for those obligations.
Compliance versus collections
Compliance means that you have filed.
Collections means that you have paid.
Those are different. If you owe CRA money, a collections officer will call you. As long as you are caught up to date on your filings, they will usually negotiate a time period for you to pay them that works for both you and them.
However, if you are NOT compliant, then this is where it starts to get difficult. If you owe them money or you have not filed, then CRA will make a “guess” (an assessment) at how much money you owe them. This guess is likely to be wrong, but it does not make your obligation to them any less real. They are more likely to “guess” high, and then they will attempt to collect those funds.
If you are not compliant, it will be the mission of CRA to get you compliant. Whether or not you owe them money is not necessarily the most important thing in their eyes. Getting you compliant is normally the most important so that they get a complete picture of what you owe to them, and that you are not using trust monies (payroll and GST) to run your business.
What happens if I am not compliant?
Simply put, it will cost you money. Every time you are late, you will be assessed a late filing charge. So, if you owe CRA $1000, that can easily turn into $1000, plus late filing charges.
Late filing charges are normally higher than any interest you will owe on monies not paid.