It is not as simple as filling out a T2 form and submitting it to the Canada Revenue Agency (CRA) in order to complete the process of reporting your corporation's taxes. In addition to submitting the T2, you will also be required to submit certain "schedules" in order to satisfy the tax responsibilities that are associated with your corporation.
The CRA requires you to utilize these T2 schedules so that they can receive supplemental information about the tax return and filings that your corporation has made. A corporation can be required to complete and submit any one of the dozens of different CRA T2 schedules. Visit the website of the CRA and look under "T2 Returns and Schedules" for an extensive list of items.
The following items make up some of the T2 schedules that are most frequently utilized by corporations:
- Schedule 1 T2
- T2 Schedule 100
- T2 Schedule 50
- T2 Schedule 125
- T2 Schedule 4
- T2 Schedule 8
- T2 Schedule 3
- T2 Schedule 7
- T2 Schedule 6
- T2 Schedule 141
- T2 Schedule 5
- T2 Schedule 10
The CRA T2 plans are split into two groups.
- There are information plans with both general and transactional information.
- There are calculation plans that figure out things like net income, taxable income, deductions, taxes, and credits.
Company must also file their financial statement information using the General Index of Financial Information (GIFI) along with their T2 and these forms.
Here, we go over some of the most popular schedules that may need to be filled out as part of your company's T2 filing. Get in touch with our team of CPAs for more information or about a plan that isn't on this list.
The T2 Schedule 100
Balance Sheet Information (T2SCH100), is a necessary schedule about financial states. It uses data from the GIFI to make it easy to see how a company's assets, debts, shareholder equity, and retained profits are organized. You can add as many schedule 100s as you need if your company's balance sheet is longer than what fits on one form.
Before you turn in the sheet, make sure it is balanced properly. If the Balance Sheet Information plan is wrong, it can lead to audits and big fines.
The 2 Schedule 125
Another necessary form that needs to be sent with a T2 is T2SCH125, which is called "Income Statement Information." After it, if needed, plan 140, Income Statement Summary, comes at the very end. The information on CRA T2 plan 125 comes from GIFI as well.
On Schedule 125, you'll find information about your business's income and costs. Depending on your business, it is split into farming and non-farming income and costs.
The T2 Schedule 141
T2SCH141, the Notes Checklist, is also needed and is part of the numbers that are generated in the GIFI.
Schedule 141 is a list of questions meant to find out who made the financial statements and how much work they put into it, as well as what kind of information is in the notes to the financial statements. This tells the CRA about the skills of the accountant who made the statements and lets them know if the accountant has a personal connection with the company.
The Schedule 1 T2
In most cases, you need to include Schedule 1 when you file your T2.
To match up the accounting profit and the tax profit, use CRA T2 Schedule 1 (T2SCH1), which is called "Net income (loss) for Income Tax Purposes." The tax rate for your business needs to be figured out because the taxed income and the accounting profit aren't always the same. Schedule 1 lets you figure out your tax profit by taking into account deductions, costs, and other exceptions.
The T2 Schedule 50
In Canada, all businesses have owners who own shares. If you are a private company and someone owns 10% or more of your common or special shares, you need to fill out Form T2SCH50, which is called "Shareholder Information." Along with the desired information, it should only be filled out for the top 10 shareholders.
Many Canadian companies will need to file T2 schedule 50, but any company that doesn't meet this standard doesn't have to.
The T2 Schedule 3
It's not as hard as it sounds to figure out T2SCH3, Dividends Received, Taxable Dividends Paid, and Part IV Tax. Corporations only need to follow Schedule 3 if they paid dividends to owners or got dividends from other companies. If a business didn't meet this need, it doesn't need to file Schedule 3.
The T2 Schedule 4
You might not need to fill out T2SCH4, Corporation Loss Continuity and Application. According to Schedule 4, the account of the company's different losses over its lifetime is made. That goes for both capital loss and non-capital loss, like a farm loss, a restricted farm loss, or a loss in a limited company. You can also use it to ask for a loss carryback to years past.
The T2 Schedule 5
Tax Calculation Supplementary - Corporations (T2SCH5) is used to figure out how to split up a company's income in the provinces where it has a stable presence. This is to make sure that the right areas get their taxable income.
You need to file Schedule 5 if, during the tax year, your business:
- If a business has a stable presence in more than one place,
- claims provincial or territorial tax credits or rebates,
- or pays taxes (other than income tax) in Newfoundland and Labrador or Ontario,
H2: The T2 Schedule 6
You will need to file T2SCH6, Summary of Dispositions of Capital Property, if your business has sold or given away assets. Stocks, real estate, bonds, and anything else that might fit can all be considered assets. If your business sold a rental income property, a piece of real estate, or shares in another business, it will need to file T2 schedule 6. It also has the right lines for subtracting business investment losses when they happen.
The T2 Schedule 7
The difference between a company's investment income and its working revenue can be seen on T2SCH7, which is called Aggregate Investment Income and Active Business Income. These two types of income have different tax rates and ways to get the small business deduction, so they need to be split to get the right tax rates.
A business doesn't have to file Schedule 7 if it only has running income and no investment income.
The T2 Schedule 8
Companies often use the T2SCH8 plan for Capital Cost Allowance (CCA). Schedule 8 is used to figure out how much a company can deduct from its eligible expenditure tax for the wear and tear on its physical assets. This depreciation is not tax-deductible, but tax laws say that a company is entitled to a tax depreciation rate that is based on depreciation rates that have already been set.
Schedule 10, the Eligible Capital Deduction, was used by companies to report intangible property before January 1, 2017. Schedule 8 has taken the place of schedule 10 as of January 1, 2017. If you need to file company taxes for a year that ended before January 1, 2017, you should talk to an accountant to make sure you fill out the right forms.
Filing Your CRA T2 Schedules
When you take your business taxes to a professional accounting company, the CPAs and tax experts will file all the necessary schedules along with the T2 for the business. People who work at Numetrica are trained to help.
Get in touch with us to set up a free meeting. Learn how we can make it easier for your business to file its taxes.