Perhaps one of the most feared of institutions among Canadian small businesses is the Canada Revenue Agency. It is not uncommon for a small business to be audited and receive a notice of assessment that is substantially higher than expected. Nor is it uncommon that the GST bill comes during the season when cash is tight at the business. This is obviously very stressful and potentially financially devastating for a business.
What we have learned by observing a large number of small businesses across the country is that dealing with the CRA can be reasonable. These are the things that we’ve learned are important to keep in mind.
– If they got it wrong and you know they got it wrong, then promptly dispute the claim, hire the professionals required to defend you and prove them wrong.
– If they’ve got it right but the bill is a big number and cash is tight, be proactive and call the CRA. By doing so you are demonstrating to your CRA representative that you are a person of strong character that takes their obligation seriously – and that it is purely a matter of circumstance that is making it difficult for that obligation to be met.
– Iron out a payment plan. Our experience is that if you are proactive, open and transparent with CRA, they are reasonable people and will work with you on a payment plan that doesn’t render you insolvent. Do your numbers carefully and make sure that the payment plan you are agreeing to is something you are confident that you will be able to execute on.
– Once a payment plan is ironed out, stick to it. That’s why it is important to run the numbers before you agree to it. Because if you get off track from the payment plan, you risk losing your credibility, and at that point the CRA may begin to exercise its legal rights to try to collect payment. At that point the CRA can freeze bank accounts and put businesses under if they are not cooperating and sticking to the plan that was in place.
If you find yourself in a payable position to CRA it is obviously best to clear that balance out so that any headaches associated with the tax man are set aside. At that point, taking out a merchant advance from Merchant Advance Capital, or a merchant advance small business loan, can be very advantageous. We understand the challenges of running a small business and that a CRA bill can sometimes be daunting. Sometimes it is a bookkeeper that did not properly account for ITCs, sometimes its contractors of yours being deemed employees so you unexpectedly have to pay payroll source deductions (and catch up on several years worth at that!). Whatever the reason, we understand the stress that it can cause and we are here to help!