Corporate Tax Return

When Albert Einstein was asked about completing his income tax form, his answer was: “This is a question too difficult for a mathematician. It should be asked of a philosopher”.

So the accountant/tax preparer is the middle ground solution between a mathematician a philosopher, and many more… a versatile person.

“Death, taxes and childbirth! There’s never any convenient time for any of them.” (Margaret Mitchell, Gone with the wind)

All Canadian resident corporations have to file a corporation income tax (T2) return every tax year even if there is no tax payable or the corporation was inactive during the fiscal period.

Canadian-controlled-private corporations (CCPCs) with a taxable capital less than $10 million are eligible to claim the Small Business Deduction (SBD) up to a limit of $500,000 per calendar year.

The business limit must be allocated among corporations that are associated in a taxation year, and is reduced by any portion that the CCPC assigns to another corporation. Corporations are associated when there is common control of two or more corporations (for example, control by the same person or group of non-arm’s length persons). These rules will prevent one owner from conducting business activities in multiple corporations in order to access multiple SBDs.

For many businesses, having an accountant prepare their income tax returns is the most advisable option because mistakes can be costly.

For many businesses, having an accountant prepare their income tax returns is the most advisable option because mistakes can be costly.

Some tips to consider:

  1. Maximize your tax deductions by planing ahead your tax strategy.
  2. Avoid penalties by filing your return before the deadline. In Canada, businesses need to have their taxes filed within 6 months from their fiscal year end.
  3. Avoid large lump-sum payments and late charges by paying installments based on estimated revenue.
  4. Handle a possible CRA audit by keeping good records of company’s financial transactions.

Documents required by accountant for income tax preparation are as follows:

  • Financial statements for the fiscal year (Balance Sheet, Income Statement and Cash Flow Statement)
  • Corporate minute book
  • Last year’s notice of assessment and last year’s tax return
  • Payroll information
  • Motor vehicle expenses for the vehicle(s) registered under the business, including the vehicle driving log with business kilometers driven
  • Business-use-of-home expenses, when your home is your principal place of business and you use a space in the house to earn business income; using this space regularly to meet clients, patients
  • Business expenses information such as travel expenses, advertising expenses, rent, utilities, office supplies, maintenance and repairs expenses, internet and telephone expense, shipping and any other expenses specific to your business
  • The amount of installments paid in tax during the fiscal year (if any).