Corporate Tax Filing Guide

Author: Williamson Accounting |

Blog by Williamson Accounting

Well, we are listening. Williamson Accounting has been assisting clients with their various accounting needs for a few years now, from Business Consulting to Corporate Tax Preparation and Filing. We are always happy to provide helpful information and tips on various topics.

Inspired by a few small business clients I am hoping to shed some light on the area of Corporate Tax Filing.

Understanding Corporate Tax Filing
First, please keep in mind that this is a general guide and is more about the process that leads to efficient preparation of your return than a full guide on corporate taxation. We would not want to put you to sleep with the multitude of tax rules pertaining to the countless industries we serve.

Difference between Personal and Corporate Tax Returns
Its important to realize that a personal tax return is quite different than that of a corporate return. By registering your corporation you have created a separate legal entity, with its own rights and obligations. Like you, the corporation has to file a tax return each year to report its taxable income for the fiscal year.

Your personal tax return is prepared on a T1 General Information Form and your corporate returns are prepared on the T2 corporate form. Knowing the difference between these two structures and proper tax planning can lead to significant savings for the business owner.

To assist you and help in organizing the information needed to properly prepare your corporate tax return please see the attached Corporate_Tax_Checklist.pdf .

Places to Incorporate
If you are a business owner that is starting a new company or seeking to incorporate your present business services you may choose to incorporate your company through an accountant, lawyer or financial planner. You can also easily incorporate your company by yourself online. 

Before you incorporate I would highly suggest  seeking the often highly beneficial advice of the professionals mentioned above. Industry Canada provides priceless information on Corporations. You can also incorporate your company from this web site.

Filing Due Dates
One of the great benefits of having a corporation is the ability to set a corporate year-end that fits and benefits your overall tax scenario.  Most small businesses are required to file their corporation tax return no later than 6 months after the fiscal year end- please see the T2 guide for more information. If your corporation has taxable income, then it is required to file its return no later than 2 months after the fiscal year end. Corporations that have taxable income that meet the requirements for the Small Business Deduction can file up to 3 months after the year end.

Expectations after Filing
You have filed your corporate tax return and 2 weeks have passed. When will it be processed? Did it get mailed? Don’t panic! It’s important to note that 90% of T2 returns will be processed within 2 months of filing. Your return might take a little longer if there is additional credit such as SR&ED credits that needs to be processed.

Next, you will receive a letter from the CRA stating they have assessed the fiscal year end of your corporation, but... you don’t understand some of the numbers and the jargon. Now what?  Not to worry. This is normal, fax the information to your accountant and he or she will help you understand some of the information and discrepancies.

Note: the corporate tax assessment and related statement of accounts are usually needed by your accountant to verify that the return has been filed, reconcile corporate tax accounts and to properly state financials.