2%20Procedures%20and%20Administration

The other methods may be more appropriate if the tax

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The other methods may be more appropriate if the tax owing has been decreasing over the past two years. If estimates are too low, there will be interest charges
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Instalments Individuals Example Following are amounts of net tax owing: 2006 $25,000 2007 $36,000 2008 $28,000 estimated Method 1 Method 2 Method 3 Complete Self Study Problem Two-1 on pg. 65 Complete Exercise Fourteen-3, 4 and 5 on pg. 43
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Interest Charges All taxpayers The CRA charges interest on any payments that are not made on the due date. For example: On late or deficient installments from the date the payment was due to April 30, when the final tax payment is due. On balances not paid by April 30, the balance due date On penalties that are assessed for filing returns late Interest is charged at the prescribed rate, defined in the regulations. There are 3 prescribed rates: Regular rate applies wherever a prescribed rate is used in the Act, except for amounts owing to or by CRA (currently 3%) Regular rate + 2% - used for calculating interest on refunds owing by the CRA to a taxpayer. Amounts paid by the CRA must be included in income if they exceed amounts paid by the taxpayer to the CRA . Regular rate + 4% - used for calculating interest on amounts owing by taxpayers to the CRA. Amounts charged by the CRA are NOT DEDUCTIBLE.
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Penalties All taxpayers Failure to file s. 162(1) 5% of the tax unpaid at filing date, plus 1% of unpaid tax for each complete month the return is late for up to 12 months. Interest is also charged. Failure to file, previous penalty in preceding 3 years s. 162(2) 10% of tax owing +2%/month for up to 20 months. False statements/omissions s.162(2) the greater of $100 and 50% of the increased tax liability.
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Penalties All taxpayers Late or deficient installments: 50% of the amount by which the interest owing on the late or deficient installment exceeds the greater of $1,000 and 25% of the interest that would be owing if no installments were made. Will only apply when the tax payable is significant. Complete Exercise Two-6 on pg. 45
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Corporate Returns Corporations must file within 6 months of corporate year end. Prescribed form is T2. Must include information from the financial statements along with other schedules and information. Payment due dates: Most Corporations 2 months after year end Canadian Controlled Private Corporation (CCPC) claiming the Small Business Deduction (SBD) with taxable income < business limit for preceding year 3 months after year end
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Instalments - Corporations Monthly instalments are required unless taxes payable for current or preceding year are ≤ $3,000 Private corps may reduce by 1/12 of dividend refund on payment of dividends for the year Offsetting of interest is allowed on corporate tax over and under payments, when there is a written application
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Instalments - Corporations Three methods to determine amount: 1) 1/12 of the estimated tax payable for the current
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