How Did I Fall So Deep Into Tax Arrears?

falling coins

Sales are up and the money is flowing into your bank account. Think all that money is yours? Think again. If you’re tracking any of the following taxes such as GST, PST, Payroll or WCB a portion of those funds belong to government agencies.

On the one hand it’s easy to remember GST and/or PST when we include it on our invoices or when making purchases. But it’s another thing to remember when we’re making deposits or looking at our bank balance and thinking that it’s all ours. A second bank account to hold those funds can be a great help and it’s as easy as making a transfer on your bank’s website.

Payroll and WSIB taxes can be another source of frustration. You should have an idea how much your payroll will be each month. It’s easy to calculate the taxes. CRA provides free-of-charge tax table books or a stand-alone program to calculate the taxes for each employee. Don’t forget to include your company’s portions of CPP and EI. Reserve a portion of these taxes each time you make that bank deposit. Do you have the information at hand when it’s time to send in the remittance report? Keeping your bookkeeping up-to-date means you have the numbers ready when you need them. We procrastinate when it comes time to send in the remittance reports, but CRA will hit you hard with penalties and interest if you miss that due date. It is easy to get into arrears and can be very difficult to get out of that ever-deepening hole.

Think bankruptcy will fix your problems? Think again. Tax arrears are not swept away with bankruptcy. They will still be owed long after your other problems are gone.

What is the solution?

  1. Keep your bookkeeping up-to-date so you have the numbers ready when you need them.
  2. Have a second bank account to hold those funds until it’s time to remit to the government.
  3. Transfer funds to the second bank account each time you make a bank deposit.