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Everything you need to know about corporate tax returns T2s

Everything you need to know about corporate tax return preparation services

When do you need to file your corporate tax return?

Corporate tax returns filing deadline with CRA is six months after its fiscal year-end date.  So, if the corporation year-end is on Dec 31, deadline for filing the corporate tax return becomes June 30.  In this case fiscal and calendar year are the same.

When do you need to make payments? 

Although corporate tax return deadline is 6 months after the year-end, payments if any are due 3 months after year-end.

When is the best to choose a corporate tax return?

Chances are you have not incorporated on Jan 1 so that you can choose Dec 31 as a corporation tax year-end. So how do we do accomplish this?

Here is the solution, the 1st year of corporation can be elected or selected. For example, let’s say a company incorporates its business on May 28, the corporation can either choose May 29 as the year-end which is definitely awkward.  So, in year one, we choose Dec 31. Yes, it is allowed to have a short year-end.

Consequently, the following fiscal and calendar years will be from Jan to December.

What takes place at year-end of a corporation?

This is when a CPA Chartered Professional Accountant completes a year-end. Basically, they will check the accounts, record dividends and bonuses, complete a tax strategy. Create adjusting entries and provides them back to the corporation.

How much does it cost to prepare and file a corporate tax return?

Average cost of corporate tax return preparation and year-end range from $1,200 to $6,000 often the number of adjusting entries can determine the fees as well. Basically, when there are fewer adjusting entries, it means the accounts were relatively clean, bank reconciliations were completed, depreciations were recorded and so on. However, I remember that I worked on a company and had to input over 60 adjusting entries. It meant that I had to look and correct so many accounts and meant it took longer.

Can corporate tax returns be efiled?

Yes, just like personal tax returns, corporate tax returns can be efiled to CRA. However, filing corporate tax returns are more complicated than personal tax returns.  I would highly recommend having a CPA firm compete and submit your corporate tax returns.

What are the typical schedules that need to be filed when completing corporate tax returns?

Following are typical schedules that need to be completed and sent to CRA.

T2 Jacket

Schedule 1 – Income and loss

Schedule 3 – Dividends

Schedule 4 – Carry back losses.

Schedule 8 – To list capital assets and their amortizations.

Schedule 32 – Scientific research and Experimental Development (SRE&ED) Expenditures Claim

Schedule 50 – List of shareholders

Schedule 100 – Balance Sheet

Schedule 125 – Income Statements

In addition, there will be provincial schedules.

Are business tax returns same as corporate tax returns?

Not necessarily, business tax returns for individuals are filed through personal tax returns schedule T2125. However, I have seen some disasters where corporate tax returns were filed using T2125.

To correct the mistake, we created an amended T1 return (personal tax return) and removed the schedule 2125. We then created a short year-end since the corporation was incorporated in April.

Corporate tax return rates

Federal rates

The basic rate of Part I tax is 38% of your taxable income, 28% after federal tax abatement.

After the general tax reduction, the net tax rate is 15%.

For Canadian-controlled private corporations claiming the small business deduction, the net tax rate is:

  • 9% effective January 1, 2019
  • 10% effective January 1, 2018
  • 10.5% before 2018

Final though, let our professionals prepare your corporate tax return.

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Monday, 22 April 2024

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