If you have a small business in Canada, then things like the small business tax due date are of the utmost importance. The reason is simple, you don’t want to get past those deadlines, otherwise you can deal with a variety of penalties that can be rather costly. That’s why sticking to the due dates and paying your taxes beforehand is extremely important.
When is the small business tax due date?
In Canada, the small business tax due date is up to 6 months after the tax year ends, which in the case of a small business is the fiscal period. For example, if the tax year ends on March 31st, you will need to file your taxes until September 30th. However, if the last day of the tax year is not at the end of the month, then the deadline is in 6 months on the same day that the taxes were filed. So if you filed your taxes on October 23rd, then April 23rd will be the tax due date.
What is the filing due date falls during a public holiday or during the weekend?
There can be situations when the small business tax due date can fall during a CRA-recognized public holiday, or during the weekend. If that happens, the return is still seen on time if the CRA receives it before or during the next business day. The same thing is valid if the return was postmarked before or on the next business day. Ideally, you want to avoid sending it very close to the deadline to avoid any issues.
Some corporations have 3 months to pay their taxes
While the small business tax due date is usually 6 months after the end of their tax year, that’s not always the case. These are the situations when such a thing is valid:
- The company is private, Canadian-controlled
- Small business deductions were claimed either during the previous or current tax year
- The small business was associated with other company during the tax year, but the taxable incomes don’t get over the total business limits. The same thing is valid if the company was not associated with another business, yet its income doesn’t surpass business limits.
Can you opt for installment payments?
Small businesses and corporations registered in Canada can pay monthly as well as quarterly installments. The installments are based on income/territorial tax. These are usually the total amount split into equal, smaller amounts that need to be paid at a specific date.
Generally, installments are due at the last day of the month or the last day of the designated quarter. The first payment is due a month or a quarter less than a day before the tax year starts, then the other payments is due on the same day each month/quarter. There are situations when you don’t have to pay installments, either due to a short tax year (shorter than a month), if the total tax payable amount is $3000 or less, or if you have a new corporation.
What happens if you don’t file your small business taxes on time?
A penalty is applied if you file your tax returns after the deadline. You will have a 5% penalty calculated for the tax you didn’t pay on the due date. Then an additional 1% is added as a penalty every month until you fully pay all the due taxes. On top of that, if the installment payment deadline is missed, the CRA charges interest, and if the interest goes past $1000, you will have an installment penalty that’s 25% the interest for the installment.
Understanding the small business tax due date in Canada is very important if you want to avoid any penalties. As you can see, a 5% penalty is applied if you don’t file your taxes on time, and there are also recurring penalties if it takes multiple months. That’s why it’s important to file and also pay your taxes in time. This will help prevent penalties, while also allowing your business to invest money instead of losing it on penalties/interest rates.