Everything You’d Want to Know About Filing Taxes Late

Tax season is full of stress, especially as the April 30^th deadline gets closer and closer. You may be wondering what happens if you miss the date for submission. The answer is nothing good. That’s why accountants always recommend filing and getting started as early as possible. And here’s why.

Deadlines

Have it marked on your calendar. April 30^th is the deadline that income tax returns have to be submitted by as well as any balance owed to the government. Make sure any payments sent by mail have been postmarked on or before that date or you’ll get a penalty. If you’re self-employed there’s a big more wiggle room. Taxes don’t have to be filed until June 15^th but the catch is that any balance owed is still due on April 30^th, which confused a lot of people. Talk to your Toronto accountant to make sure you’re following the right dates.

Penalties

There are some pretty hefty penalties for filing late. You’ll be charged 5% of your owned balance plus an additional 1% for each additional month that your return is late. These penalties can increase too, doubling even, if you are continuously late. If you can’t afford to pay your balance by the due date at least make sure you file your taxes.

Benefit Interruption

Government benefits may also be interrupted in addition to financial penalties. Filing annual tax returns is a requirement in order to receive some government benefits. If you file late, or not at all, the payment for these programs will likely be late.

Programs that are affected by this are:

• Canada Child Tax Benefit
•  Universal Child Care Benefit
• Working Income Tax Benefit
• Guaranteed Income Supplement
• GST/HST Benefit
• Ontario Trillium Benefit

I Filed Late: Now What?

If you’ve already missed the deadline the best thing to do is file as soon as possible. Penalties get worse with each day that passes. There’s something called voluntary disclosure which is when you submit your taxes and forms before the CRA audits and asks for them. If you do this you will only be required to pay the amount owed plus interested instead of steeper penalties.

How to Avoid Being Late

Accountants always preach that you should avoid filing late at all costs, even if it means a late night or two. The penalties for filing late are heavy. Start getting all the information you need as early as you can. Don’t wait for the deadline either- file as soon as you have everything ready. Consider hiring an accountant to help you with everything as well. Contact a Toronto chartered accountant today if you have any questions, concerns, or are interested in our tax services.

Advantages of Filing Online Taxes

Most of our life happens digitally today, and not just communication and entertainment. We receive almost all of our important documents from bank statements to bills via the Internet. So why haven’t we shifted our taxes into the digital age with us? It’s been slow going but thankfully with the CRA NETFILE system taxes can now be done online. Chartered Accountants back this digital filing system and here are all the advantages of using it.

What is NETFILE?

NETFILE is the online tax filing system that is used by the CRA. It’s a free system of Canadian taxpayers. As long as you have an Internet connection, a completed tax return, and a four-digital NETFILE access code (that can be found on your T1 personal income form) you are good to go.

Security

People always worry about doing anything important over the Internet because of security. In this instance, don’t worry about privacy or security. The CRA and NETFILE use the most advanced encryption available in North America. Your financial data will be safe and secure, only to be seen by yourself and the CRA.

Errors

Accountants say another advantage to filing online is that there are fewer mistakes and errors made. NETFILE will actually tell you if there is an error in your taxes when you try to upload it. This gives you a chance to double check and fix the error before submitting. This isn’t a luxury that one gets with pen and paper taxes. It saves you from having to made amendments later on. Flagging these errors before submitting also lowers to chances of an audit.

Speed

Filing your taxes online is way faster than doing it with paper even if you have an accountant helping you. In addition to filing being quicker, you also get your returns earlier. Refunds can be set up with a direct deposit and received in as little as eight business days. By comparison, it usually takes anywhere from four to six weeks to get refunds when filing with paper.

Tracking and Organizing

Filing your taxes online means you have a permanent electronic record of them. This will keep them nice and organized. If you ever need to access them later on or have proof of them they can be conveniently located. It saves you time and stress that comes with digging through piles of old papers looking for the right ones.

More Refunds

Accountants’ say that people who file online tend to bet more refunds back. When you file online you get a chance to see what tax credits and deductions are available to you. If someone files on paper without an accountant they often miss out of these opportunities.

Conclusion

There are so many benefits to filing your taxes online. There’s ease, speed, along with greater refunds and less stress. Contact a Toronto chartered accountant today to get help with your taxes or if you have any more questions about filing taxes online.

5 Myths About Audits

Taxes are already stressful, but the threat of an audit makes it that much worse. It doesn’t help that there are so many myths and falsehoods floating around there about audits. Here are the 5 most common ones that we’ve debunked.

Myth 1: Filing Online Increases Your Chance Of Being Audited

There is no evidence that backs up this up. This myth stems from the fact that when you file online you can’t file paper recipes or tax slips. That means that when the CRA needs these documents they will send a request for them. Many people interpret this as an audit when in fact it’s nothing more than a simple routine verification. Filing online is actually great because there are fewer errors and you get your returns quicker.

Myth 2: Amending Your Taxes Means Getting Audited

Most people file an amendment when they realize they have made an error, put in a wrong figure, or forgot to add something. Some people won’t file amendments though because they are worried this will increase their risk of an audit. An amendment will be screened, but so are your initial taxes. This is a chance to explain what mistake you made. This can actually help you avoid an audit.

Myth 3: The CRA Will Show Up At Your Door

Here’s the thing, the CRA can show up at your door but they only do that after sending you a notice and scheduling an appointment. In some audit cases, they need to inspect one’s home and or workspace. Most audits take place entirely through the mail, though. If anyone contacts you online or shows up claiming to be the CRA and you haven’t received a written letter then it’s probably a scam.

Myth 4: Getting Audited Means You Did Something Illegal

People have this perception that people only get audited when they do something illegal. Sometimes that’s true, but in most cases, people get audited because of simple mistakes. Hiring an accountant is a good way to avoid this.

Besides errors, there are a ton of other reason people get audited. It could be a secondary audit, your business might have made more than the average, or the CRA could dispute the one portion of a claim you made. An audit is a chance to argue your case, not that you immediately did something wrong. Sometimes the CRA even audits at random. Audits are stressful enough without the stigma.

Myth 5: Audits Are Horrible Experiences

This myth stems from a history of truth. In the past, tax agencies were cruel, ruthless, and unnecessarily harsh. They earned a reputation that has stuck long after serious changes were undertaken. Today, the CRA is more focused on working with people rather than against them. An audit isn’t pleasant but it doesn’t have to be horrible. To make an audit go as smooth as possible by being cooperative, compliant, and honest. Hire a Toronto chartered accountant to help you out if you’re too scared to do it on your own.

Conclusion

Audits are stressful and can be scary but they’re not the end of the world. Honesty goes a long way when it comes to an audit.

Getting Audited? Here’s What You Should Know

Getting audited by the CRA (Canadian Tax Revenue) is scary. It’s the stuff of nightmares. There are multiple reasons why your personal or business finances have been audited. The best thing to do with an audit is to cooperate and be honest. Here is everything you should know about getting audited.

Audit Reasons

There are tons of reasons you could be getting audited. Cash businesses such as restaurants get audited more frequently than others. Businesses that claim to make more than the industry average for the year are also at a higher risk of being audited. The CRA also has audit projects, where they will target certain industries that have a higher non-compliance rate.

You could also be audited because of a something called a secondary review. That is when the CRA audits you because you are a spouse, investor, and supplier of a company or individual that is undergoing a main audit. This is done so that your records match the ones of the main audit. The CRA will also do random audits. Always make sure you are compliant because being resistant will only make things worse.

Audit First Steps

The first thing that will happen during an audit is that you will be contacted by the CRA. Make sure you receive a written notice to make sure it’s a legitimate audit and not a scam. Ask them for a list of documents they want and work on compiling them. Make sure to contact your Toronto chartered accountant to get their aid with this.

Documentation

Certain documents will be required during a CRA audit. Sometimes all of them are requested and other times it's only specific ones. Receipts, bank statements, income forms and other documents will be requested. Work with your accountant and bank to make sure you get everything they ask for.

Addressing Problems

The CRA should be clear about what issue they want to resolve with an audit. Maybe they disagree with you about income or expenses you claimed. Maybe the car expenses you claimed aren’t accurately documented. The key to a smooth audit is to show valid reasons and support for your claims.

Results

All issues will be resolved at the end of an audit. You might have to pay a balance or you might not owe anything else. The CRA will send you a document letting you know. You and your accountant will have some time to decide if you accept their results or if you want to challenge them.

Conclusion

An audit is scary but it isn’t the end of the world. Stay calm and honest. The best thing to do is consult your small business accountant at every step of the way. It’s important to remember that just because you’re being audited doesn’t mean you did anything wrong. Stay compliant and things will work out.

Accounting Software Comparison: Xero vs. QuickBooks Online

Inuit’s QuickBooks Online has dominated the cloud accounting software for years. Recently, another competitor has arisen to challenge them- Xero. QuickBooks Online still has the majority of the market share, but Xero is growing at the same rate of them now showing it to be a worthy competitor.

Many small business owners see these two programs and wonder what the difference between the two are. They both offer similar features but there are a few differences between them. To help you determine which accounting software is right for your small business we’ve compared them to you.

Cloud Accounting

Both software is cloud-based accounting ones. Cloud accounting is when financial data is remotely stored in cloud servers. There are many benefits to cloud accounting. Cloud accounting has increased security, tends to be cheaper, and allows for remote access and real-time updates. So whether you choose Xero of QuickBooks Online you will get the benefits that cloud accounting offers.

Users

When it comes to QuickBooks Online and Xero cloud accounting, the number of allowed users is one of the biggest differences. Xero offers an unlimited amount of users, no matter what subscription package you have. Unfortunately, QuickBooks Online only allowed one, three, or five users depending on the plan you have. If you have a small business that requires multiple people to use the accounting software then Xero might be the option for you. Adding additional user to QuickBooks Online can quickly become pricey.

Use

Neither Xero nor QuickBooks Online would be so popular if they weren’t so easy to use. Both of them offer easy navigation, a nice layout, and tons of useful features. Many accountants say that Xero is slightly better when it comes to ease of use, though. A common complaint about QuickBooks Online is that they have some unnecessary navigation steps and minor bugs.

Pricing

Pricing is a big factor for small business owners when it comes to choosing bookkeeping software. It is a little difficult to compare Xero and QuickBooks Online, as their packages don’t always offer the same things. QuickBooks Online offers a great deal for a company that needs the bare minimum for bookkeeping. For more comprehensive plans, though, Xero offers far more for a lesser price.

Customer Service

Customer service and support say a lot about how a company cares about their clients. Luckily, both Xero and QuickBooks Online have good customer service. In the past, people had some issues with QuickBooks Online but Inuit appears to have listened and fixed those problems. Both have proven to be great at fixing small issues. Accountants and clients say Xero does slightly better when it comes to solving bigger issues as they have a faster response time and representatives that know what they’re doing.

Security

A common concern small businesses have about cloud accounting is software. Accountants swear by cloud accounting software such as QuickBooks Online and Xero though. Both companies excel at making sure your small businesses financial data stays safe. Between secure data centers, encrypted passwords, and authorized accounts your information will be safe and protected.

Verdict

Both Xero and QuickBooks Online are great options for your small business accounting needs. Xero pulls ahead in some categories but QuickBooks Online has years of experience. If you’re still having a hard time deciding between the two ask one of our Toronto chartered accountants which one would be better for your small business.

Small Business Accountant: Is Hiring One Worth It?

A big dilemma that small business owners face is whether or not they should hire an accountant. There are lots of factors that go into whether or not a small business accountant is worth hiring for your business. For some people, hiring one once a year for taxes is enough, but for others hiring one long term is more useful. Here are all the factors you should look at to determine if hiring a small business accountant is worth it for your business.

Skills

Your own skill set is an important factor to consider. Small business owners wear many hats, from management to bookkeeping. But if you’re not training in accounting or bookkeeping doing it all yourself could be a mistake. Even the smallest financial error can be detrimental to your business. A chartered accountant will help prevent these mistakes from happened.

Time

Wearing so many hats means small business owners don’t have a ton of time. Why do more than you have to? Hiring an accountant will save you time. It will free up valuable time that can be spent focusing on other parts of your business.

Money

A big reason small businesses don’t have an accountant is money. In fact, if you’re looking at if it’s worth its cost is probably what you’re looking at most. The fact is that a chartered accountant will give you a return on investment. They will find bookkeeping errors, always make tax deadlines, will find tax breaks, and help you budget. All of this will end up saving you more than you’re spending.

Stress

Running a small business is incredibly stressful. Hiring an accountant will help remove some of the weight off your shoulders. Dealing with small business finances can be time-consuming and frustrating, so why not hire someone else to deal with it?

Advice and Help

Added bonuses many people don’t know about hiring an accountant is the advice and help you get. A small business accountant can make a budget, provide strategic advice, and help expand and grow your business.

Taxes

Maybe you’re not sold on hiring an accountant for everything yet. There’s nothing wrong with trying one out by hiring them just for tax season. Taxes for small business can be overwhelming and they are super important as the CRA keeps a close eye on them. An accountant will sort out your books, file the paperwork, and be sure to get you tax breaks.

Contact a Toronto Chartered Accountant today to talk about how we can help you with your small business accounting needs.

Signs of a CRA Scam

Each year, more and more people are falling victim to CRA scams. These aren’t scams being done by the Canadian Revenue Agency but rather people scamming others by pretending to be the CRA. It’s easier to fall trap to these ploys than most people think. Many go to great lengths to be convincing. By using fake CRA identification numbers, make replicas of official websites and forge official looking documents. If you look for these signs though you can keep yourself safe and be able to identify one.

CRA Calls

One of the most common scams that people pull is calling individuals to claim they owe tax money that needs to be paid immediately. Don’t ever believe these calls. The CRA will never call and demand and immediate payment. In fact, they never even call without having mailed you a bill or notice first. It’s easy to see how people would fall trap to this scam, though. The fear of owing money to the CRA can be intense. Never give any information over the phone and double check by calling the official CRA number.

Payment Demands

The CRA will never call, email, or mail a bill demanding an immediate payment without giving you the opportunity to question or appeal them. The CRA will always work with people to find a payment schedule that works for them. The real CRA will take the time to answer questions and discuss payment methods and timelines.

Required Payment Methods

Certain payment methods are preferred over others when it comes to scam artists. This is why most CRA scams will require you to pay only using these specific methods. The real CRA has a long list of acceptable payment methods. Wire transfers, cash, and prepaid debit cards tend to be favored among scam artists as they are hardest to track.

Credit Card Numbers Over the Phone

CRA scammers will ask for credit and debit card numbers over the phone. You should never give out this information over the phone unless you know for sure who is calling. The CRA will never ask for this information over the phone. If you have given your card numbers out over the phone contact your small business accountant to check your finances.

Threats of Law-Enforcement

It is true that if you don’t pay your taxes or have committed fraud you could face legal repercussions. However, the CRA will never call and threaten you with law-enforcement. There is a long legal process for CRA fraud issues. A popular CRA scam is to threaten people with jail time or calling law enforcement if a payment isn’t made immediately.

Email Phishing

Email “phishing” is when scams happen through the web or email. Scammers will send out official-looking emails with links to official-looking websites to trick people into believing they are the CRA. They seek out personal and financial information to be used against them. Pin numbers, social insurance numbers, and credit card numbers are frequently asked for. Always show emails of this nature to your accountant or call the CRA to double check the validity.

Tax Refund Scams

Sometimes scammers don’t ask people to pay but instead ask for information in order to receive tax refunds. If you are going to receive any tax refund you will be mailed an official notice from the CRA. Always double-check everything before giving out information.

What To Do If You Come Across a Scam

When you come across a CRA scam there are a number of things you should do. Double-check everything with your Toronto chartered accountant and the CRA. Contact one of the CRA hotlines and file an official complaint. If you think you have already fallen victim to a scam and notice issue with your financial data contact the police.

6 Reasons Why People Are Reluctant to Get Lost In the Cloud

Despite the widespread use of cloud technology in everyday life, there is still some resistance when it comes to adopting cloud technology for accounting purposes. Below are the top six fears identified by Toronto chartered accountants that are stopping people from using cloud accounting software.

1. Security

Potential security risks are the top concern as to why people are hesitant to switching to cloud accounting. There’s no need to worry though. Cloud accounting is actually safer than traditional software due to its remote storage, encrypted channels and password protections, making it a lot harder for the data to get stolen, lost or damaged.

2. Fads

Cloud technology is here to stay. Don’t worry about wasted time spent adopting and learning a new technology only for it to be obsolete the moment you get it. That won’t happen with cloud accounting software, at least not for a few years.

3. Cost

Compared to traditional software, cloud accounting is actually cheaper. There’s no costly updates, no expensive equipment and businesses can even cut costs on IT personnel and traveling expenses to and from your accountant.

4. Time

While some time is necessary in order to learn how cloud accounting works, in the long run businesses will be saving time. Updating data happens instantaneously so there’s no lost time spent trying to input months of receipts and checking for bookkeeping errors.

5. Control

With cloud accounting businesses have more control over their financial data. They can now access it anytime and anywhere, from any device. Sharing is also made easier and businesses even have control over what information gets made available to whom.  

6. Generation

The generational gap is most apparent when it comes to technology. Those that had to adopt technologies are much more reluctant to accepting cloud software versus those that were born amongst it. It’s understandable, but the cloud is the way of the future so by resisting it businesses are ignoring prime demographics and cementing themselves in the past.