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Question

Hello

I was referred to you by XXXXX at CIBC. XXXXX said that you could help me resolve a tax issues I’m struggling to understand. Here’s my situation.

From 2009 to 2012 I was actively incorporated as an electrician working in town on various independent projects. Things were so busy I not only neglected to properly track all my income and expenses I also did not file corporate tax returns forms for any years. Now my business is much less profitable than it was from 2007 to 2012 and I tend not to use the corporation for new jobs (report as business income on my personal tax return).

I was smart enough to put away 20% of all my earnings for taxes when I eventually filed, so paying the taxes shouldn’t be a problem, I just want to understand what the penalties will be like.

Can you help me fix this mess? Please let me know when you’re available and I’ll give you a call.

Thanks

XXXXXX

 

Answer

Hi XXXX

Sorry to hear about your situation, however I should be able to help in filing your late corporate returns and hopefully avoid any significant penalties. The good news is that you still have the money to pay any required taxes (often this is not the case).

First, it will be necessary to assess the availability of your bookkeeping records. Once income and expenses are properly accounted for we can start on the tax return preparation.

We’ll need to prepare T2 corporate tax returns for 2007 to 2012 and most likely 2013. Once all the appropriate forms are prepared and taxes are accurately calculated these returns should be filed under the CRA Voluntary Disclosure Program (VDP). If you are successful in submitting your returns under the program you should be able to avoid large penalties on late filing the returns (some interest may be payable on the balance).

In order to be eligible under VDP you’ll need to meet the following 4 criteria for successful submission:

  • At least one of the tax returns needs to be more than 1 year late
  • At least one of the tax returns need to have the potential of a penalty
  • You are not under audit or review by CRA and they have not asked you to file any of the returns in question
  • The submission will need to be complete

If eligible under these criteria you’ll have a high chance of being eligible for 100% penalty relief on tax penalties and possibly a reduction of interest charges.

Considering the complex nature of filing late tax returns via VDP it would be important that we meet to discuss your situation in more detail.

Please feel free to call me at 250-381-2400 and we can have a quick chat before booking an appointment.

Cheers

Phil

Phil Hogan

Phil Hogan is a Canadian and US CPA working with clients throughout Canada and the US. Phil advises on cross border tax and financial planning matters. Phil can be reached at phil@hutcheson.ca or via telephone at 250-661-9417. You can also read more about Phil at Hutcheson.ca/phil.
Phil Hogan

One response to “Late Corporate Tax Returns – Need Help!!”

  1. A-jack says:

    Hi Phil

    I’m 4 years behind in filing my corporate tax returns. I recently received a notice from CRA asking me to filing my most recent year (2013).

    Does that mean that i can still file the older years with the voluntary disclosure department?

    J

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Philip Hogan

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The information contained in this article is for general use only and should not be viewed as professional advice. Accounting and tax rules and regulations regularly change and individuals should contact a competent professional to obtain accounting and tax advice based on their specific situation.

Phil Hogan

Phil Hogan is a Canadian and US CPA working with clients throughout Canada and the US. Phil advises on cross border tax and financial planning matters. Phil can be reached at phil@hutcheson.ca or via telephone at 250-661-9417. You can also read more about Phil at Hutcheson.ca/phil.
Phil Hogan

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