20
Jan
Hello everyone! It’s Aaron, owner of Keenans. I’ve decided to tell this story to give some personal insight into the world of taxes and accounting. A recent situation brought to light the question of who is responsible for the timing of the year-end appointment.
The situation was a former client of mine had a mid-six figure tax payment due but was late on their payment. This client’s story is a great reminder that your finances will not take care of themselves!
For the purpose of this story, let’s call our client Joe. Joe has given us his explicit permission to share this information, in hopes of helping others.
Here’s The Story
In the fall of 2023, I sat down with Joe to wrap up his 2023 T2 corporate tax return (since his fiscal year-end falls before December 31). During the meeting, he casually mentioned cashing out one of his corporate life insurance policies. I suggested an early tax planning call the following year to ensure everything was on track, but since we consistently met well ahead of any deadlines, events like this were usually nothing to worry about.
Then 2024 happened. I was beset with a myriad of personal and professional changes, including leaving my former position and buying Keenans. By November, I had completely forgotten about the conversation from the previous year, though I did call Joe to inform him of the changes.
In the meantime, Joe ended up cashing out not just one, but two life insurance policies, resulting in a hefty tax bill in the mid-six figures. Unfortunately, by the time Joe set up his appointment with his new provider the payment due date had passed, interest was accruing, and Joe was understandably not too pleased.
Professional Perspective
Taxes are a funny thing. Most people do their best to avoid them, but when something goes wrong, they’re quick to “shoot the messenger’. But whose responsibility is it to ensure your affairs are handled on time?
Like many professional concerns, taxes are important but often not seen as urgent. We tend to spend our time on urgent but relatively unimportant matters—scheduling haircuts, packing for trips, planning meals, or even doom-scrolling. Meanwhile, the tasks that could significantly impact our lives get sidelined, even though a little attention could prevent costly consequences.
As a further example, I had a childhood friend whose father passed away without updating his Will after separating from his second wife. As a result, when he passed away everything went to her, and his kids ended up with nothing from his estate. A small amount of proactive planning could have made a world of difference.
Points to Consider
Situations like this are fairly easy to avoid in the world of accounting and taxes.
First, it’s crucial to know your deadlines. When are your taxes due? When is the payment due? Remember, payment due dates can differ from filing dates, especially for those with businesses or corporations. Make sure to follow up with your provider to clarify these dates. And make sure you have it written down on a calendar.
Next, consider if anything significant or unusual happened during the year. Events like cashing in a life insurance policy, selling real estate, buying or selling a business, or experiencing a family member’s passing are rare but impactful occurrences that require attention before the end of the fiscal period. Typically, you can only affect your tax position within the current period. Once the deadline passes, it’s too late to make changes that will affect your tax position.
By asking these questions and staying in touch with your provider before the year ends, you can avoid the unpleasant surprise of a hefty, unexpected tax bill. Proactive planning is key to staying ahead.
If you have any questions please reach out to us at info@keenansaccounting.ca