Q: We have a small business and are late with our taxes. 2016 has not been filed. We have had highly busy personal things to deal with but now want to regroup and get back on track. Problem is we have not kept on top of our books. Is there a way we could file by estimating? We could easily figure out our gross sales and HST. We would have to take an estimate of the expenses—maybe say, the previous three years average. I know we had a good year in 2014 and not as good a year in 2015 but we are generally close, with a small increase yearly. If we average 2013 to 2015 it will put us a little over our 2015 years sales. If we do not do this we will never catch up on our taxes, as I have begun work elsewhere and cannot go back and spend the time catching up. It will be hard enough to get 2017 up to date. Do you have any advice?
A: Jenny, the owners of a business are required to maintain adequate records for every year. By not keeping records, you are inviting CRA to do the estimating for you—and they will estimate high. The burden of proof is on you to dispute their assessments, which means recreating the books. Better for you to do that now rather than later when you are under a microscope.
Having left it so long, and having no time to do the work yourselves, your best option is to find a good bookkeeper/accountant and provide them with as much detail as you can regarding the transactions of the business for all outstanding years, especially income deposits (your financial institution should be able to provide you with those records) and expenses (check credit cards, lines of credit, talk to suppliers for receipts, check your calendar to create auto distance logs, etc.)
As the books are brought up-to-date, year by year, file the tax returns immediately to minimize the penalties and interest for not filing on time. This is the best course of action at this point for your business.
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