Every adult must file taxes, but it's a bit trickier for small business owners. If your taxes are filed late, you can face a penalty fee and even interest on outstanding balances. This fee can vary wildly depending on how late your taxes were filed and whether your business is a corporation, partnership or sole proprietorship.
Taxes can be filed through various mediums, such as fax, mail and electronically. Last year 92% of tax returns were filed electronically, making this the most popular and, arguably, the most convenient medium. Regardless of the method, you must ensure all documents are correctly signed.
What happens when you file taxes late?
Late penalties may apply if your small business taxes are filed past the due date in 2023. When you file returns after the deadline, the penalty fee is 5% of the unpaid tax due, and 1% of this outstanding amount is added for every month that passes without payment. This monthly fee is added up to a maximum of 12 months, meaning the most the penalty fee can be is 17% of the unpaid amount.
How to file taxes for small businesses
Your business is included in your personal tax return if you are an unincorporated sole proprietor. Any profit from your business counts as personal income. If your business profited 100,000, your taxes would put your payment as 100,000.
A T2125 must be filed for your business, and if you own multiple, a separate T2125 must be filed for each. On a T2125, you must include all expenses and profits earned for every business you own. When it comes to business expenses, many things may be considered, such as:
allowance on eligible capital property
business start-up costs
business tax, fees, licenses and dues
capital cost allowance
delivery, freight and express
fuel costs (except for motor vehicles)
interest and bank charges
legal, accounting and other professional fees
maintenance and repairs
management and administration fees
meals and entertainment (allowable part only)
motor vehicle expenses
other business expenses
salaries, wages and benefits (including employer's contributions)
telephone and utilities
More information on how much each expense can be deducted can be found on the CRA's website.
Filing your taxes when you're already late can be stressful, but the longer you wait, the more fees you'll have on your plate. Make sure to allocate time to submit them, and if you have the financial means to hire an accountant, that investment could save you money in the long run.
Not quite sure where to start? We can help! Reach out to the She Wolf Inc team to book a connection call today.