Sole Proprietors – The 2014 Tax Deadline for Businesses is Right Around the Corner

If you operate a sole proprietorship or partnership, the 2014 tax deadline for businesses is June 15, and that is right around the corner. This can pose a challenge to small business owners because keeping your books and records organized often falls lower on your list of priorities in the demanding world of running a small business. This causes many small business owners to miss the tax deadline or take shortcuts that can result in an audit. 

Here are some tips to avoid missing the tax deadline if your books are in bad order:

 

·        If you are overwhelmed by your record keeping and accounting – get a good bookkeeper. They usually cost far less than accountants and will ensure that you are organized. 

·        Consider an accounting platform such as QuickBooks – this is a great resource but you need to be somewhat computer savvy or you may need a course to understand how to use it properly. 

·        If you have lost receipts, request bank and credit card statements – this will help you guestimate your expenses and is better than having nothing at all.

 

Here are some things that could cause you to be flagged for an audit:

 

·        Filing your tax returns late or in a batch for multiple tax years – make sure you file before the tax deadline.

·        Significant changes in an income or expense category.  CRA’s systems are set to detect significant changes.

·        Businesses where the margins or other ratios are out of line with the industry standard.  For example, CRA does use the Industry Canada website to check various financial ratios broken down by business line.  So if you are Joe the Plumber, CRA will look at a table that can be found at this link:  http://www.ic.gc.ca/app/sme-pme/bnchmrkngtl/rprt-flw.pub?execution=e2s4    

·        Large ongoing loans owing to the company by a shareholder.

·        Businesses who deal in a lot of cash transactions, such as restaurants.

·        Businesses who are showing losses one year after another.

·        Questionable meals and entertainment expenses.

·        The sale of any business asset or property. 

If you know that your books are not properly put together and all the supporting documentation is readily available, do not make the same mistake many others have made and miss the tax deadline. Some do this out of fear, thinking that later, once they are organized, they can clean everything up. This is the worst thing you could do. Doing so will result in huge penalties. Wondering how much? The 2014 late filing penalty is 5% of the amount that you owe, plus 1% per month for up to 12 months. If you filed late in any of the 3 preceding tax years the penalty can increase to 10% of the amount of your tax debt plus 2% per month for up to 20 months. Add to this the compound interest that will be applied retroactively to the date you should have filed, as well as potential prosecution for tax evasion and you are looking at a tax nightmare.

If you think you are in over your head, reach out and consult a professional who specializes in helping businesses with tax problems.  Preparing returns (even with missing records) can be done.  That is the first level of skill you need on your side.  What is vital to a successful outcome is an affordable professional who has deep experience in utilizing the various CRA and other Federal Government programs that can allow you to address past mistakes in a fair way – fair to you and fair to the CRA. 

For more information about the 2014 tax deadline or if you have a tax problem and need help please call 1-888-868-1400 or visit www.taxsolutionscanada.com