How to File Corporate Taxes in Canada: A Comprehensive Guide

October 21, 2023
Posted by: BOMCAS CANADA
Category: Corporate Accounting

As a business owner in Canada, it is essential to understand the process of filing corporate taxes. The Canadian Revenue Agency (CRA) has specific requirements and deadlines that corporations must adhere to. In this comprehensive guide, we will walk you through the step-by-step process of filing corporate taxes in Canada, ensuring compliance with the CRA regulations.

Understanding Corporate Tax Filing Requirements
Determining Your Corporation’s Tax Year
Preparing for Tax Season
Required Documentation for Small Business Taxes
Filing Corporate Taxes for Incorporated Businesses
Filing Taxes for Self-Employed Individuals
Options for Filing Taxes
Electronic Filing Options
Filing Taxes by Mail
Professional Accounting Help
Filing Sales Taxes

1. Understanding Corporate Tax Filing Requirements

All resident corporations in Canada, except tax-exempt Crown corporations, Hutterite colonies, and registered charities, are required to file a corporation income tax (T2) return every tax year, even if there is no tax payable. This includes non-profit organizations, tax-exempt corporations, and inactive corporations¹.

Non-resident corporations may also have to file a T2 return in certain situations. To determine if you have to file a corporation income tax return, refer to the guidelines provided by the CRA².

2. Determining Your Corporation’s Tax Year

Before filing your corporate taxes, it is important to determine your corporation’s tax year. The tax year is the period for which you will report your income and expenses. The tax year can be either a calendar year (January 1st to December 31st) or a fiscal year (any 12-month period that does not follow the calendar year).

To change your tax year, you must obtain approval from the CRA. It is important to note that changing your tax year may have implications for your financial statements and tax planning strategies³.

3. Preparing for Tax Season

To ensure a smooth tax filing process, it is crucial to prepare in advance. Here are some steps to help you prepare for tax season:

a. Organize Your Financial Records

As a business owner, you are responsible for keeping documentation of all business-related expenses for the past six years. This includes financial statements, invoices, receipts, cheques, tax returns, and bank and credit card statements. Having well-organized financial records will make it easier to deduct expenses and make tax credit claims⁴.

b. Understand Tax Credits and Deductions

Familiarize yourself with the tax credits and deductions available to your business. This can help reduce your taxable income and potentially lower your tax liability. Some common tax credits and deductions for businesses include the small business deduction, scientific research and experimental development (SR&ED) tax credit, and investment tax credits⁴.

c. Know the Deadlines

Different deadlines apply depending on whether your business is incorporated or if you are self-employed. Self-employed individuals have until June 15th, 2023 to file their taxes, while incorporated businesses have up to six months after their fiscal year-end to file. It is important to be aware of these deadlines to avoid penalties and interest charges⁴.

4. Required Documentation for Small Business Taxes

When filing your small business taxes, you will need to gather various accounting documents and business records. These documents provide the necessary information to accurately report your income and expenses. Here is a checklist of the required documents:

Financial statements
Invoices
Receipts
Cheques
Tax returns
Bank and credit card statements⁴

Ensuring that you have all the required documents will make the tax filing process smoother and more efficient.

5. Filing Corporate Taxes for Incorporated Businesses

For incorporated businesses, filing corporate taxes involves completing the T2 Corporation Income Tax Return. This is a nine-page return that all residential corporations must file every tax year, regardless of whether there is tax payable. However, registered charities, Crown corporations, and Hutterite colonies are exempt from filing the T2 return¹.

In addition to the T2 return, there is also a shorter version called the T2 Short Return. This is a two-page return plus one schedule and may be eligible for use by certain corporations. To determine if you are eligible to use the T2 Short Return, refer to the CRA’s Guide T4012, T2 Corporation Income Tax Guide¹.

6. Filing Taxes for Self-Employed Individuals

Self-employed individuals and contractors have different tax filing requirements. They are required to fill out forms T4A and T2125 when filing their taxes.

The T4A, also known as the Statement of Pension, Retirement, Annuity and Other Income, helps contractors or freelancers track their earnings from each client throughout the year. Form T2125, the Statement of Business or Professional Activities, helps self-employed individuals calculate their gross income and business expenses⁴.

7. Options for Filing Taxes

When it comes to filing taxes, there are several options available to businesses. These include using tax software, filing online, or seeking professional accounting help. Let’s explore each option in more detail:

a. Using Tax Software

Using tax software can simplify the tax filing process and minimize the risk of errors. There are various tax software options available, including UFileT2 for corporate tax returns. These software programs are designed to guide you through the filing process and ensure compliance with CRA regulations³.

b. Filing Online

Filing taxes online is a convenient option that allows you to submit your tax returns electronically. The CRA provides various e-services, such as My Business Account and My Account, which allow you to file your taxes online. Electronic filing options include NETFILE and GST/HST NETFILE, which streamline the filing process and provide immediate confirmation of receipt³⁵.

c. Seeking Professional Accounting Help

Some business owners may choose to hire a professional accountant or bookkeeper to handle their tax filing process. Professional accountants have the expertise and knowledge to ensure accurate and timely filing of taxes. They can also provide valuable advice and guidance on tax planning and optimization strategies⁶.

8. Electronic Filing Options

Electronic filing options provided by the CRA offer a convenient and efficient way to file your taxes. Here are some of the electronic filing options available:

My Business Account: This portal is suitable for business owners who file GST/HST, payroll, and corporation income taxes. It provides a comprehensive platform to manage various tax-related activities⁵.
My Account: This portal is designed for individuals who report their business income on their personal income tax return. It offers a user-friendly interface for filing taxes and managing personal tax information⁵.
NETFILE: NETFILE is an electronic transmission service that allows eligible Canadians to file their personal income taxes directly to the CRA. To use NETFILE, you must have NETFILE-certified tax software⁵.

9. Filing Taxes by Mail

If you prefer to file your taxes by mail, it is important to follow the correct procedures. Print off all the required forms and fill in the necessary paperwork. Ensure that you have the correct mailing address for the tax center where you need to send your income tax and benefit returns⁵.

When mailing your tax return, consider using a traceable mail service to ensure its safe delivery. Keep in mind that processing times for mail-in returns may take longer compared to electronic filing. It is advisable to send your tax return well in advance of the deadline to avoid any potential delays⁵.

10. Professional Accounting Help

If you find the tax filing process overwhelming or lack the necessary expertise, seeking professional accounting help can be a wise decision. Professional accountants and bookkeepers are well-versed in tax regulations and can ensure accurate and compliant filing of your corporate taxes.

When choosing a professional accountant, consider their experience, credentials, and reputation. They can handle all your tax-related needs, including tax planning, preparation, and filing. Working with a professional accountant can provide peace of mind and allow you to focus on running your business efficiently⁶.

11. Filing Sales Taxes

As a small business owner, you are also responsible for filing sales taxes. The sales tax charged will depend on the products sold and your location in Canada. It could be GST, PST, HST, or a combination of these taxes.

To file your sales taxes, you can use electronic filing options such as GST/HST NETFILE and GST/HST TELEFILE. These services allow you to file your sales tax returns directly online, simplifying the process and ensuring accuracy⁷.

Alternatively, you can choose to file your sales tax returns by mail. Ensure that you have the correct forms and mailing addresses for sending your returns. It is important to keep track of your filing periods and meet the deadlines to avoid penalties and interest charges⁷.

In conclusion, filing corporate taxes in Canada requires careful planning, organization, and adherence to the guidelines set by the CRA. By understanding the requirements, preparing the necessary documentation, and utilizing the available electronic filing options or seeking professional accounting help, you can ensure accurate and timely filing of your corporate taxes. Stay informed about any updates or changes in tax regulations to maintain compliance and optimize your tax planning strategies.

Remember, if you need assistance with filing your corporate taxes, Bomcas Canada Professional Tax Accountant is here to help. Their team of experts specializes in corporate and business accounting, ensuring your taxes are filed correctly and efficiently⁸.

Now that you have a comprehensive understanding of how to file corporate taxes in Canada, you can confidently navigate the tax filing process and focus on the growth and success of your business.

Additional Information: Bomcas Canada Professional Tax Accountant are one of the best Corporate and Business Accountants in Canada when you need to get your taxes filed correctly.

Disclaimer: This article is for informational purposes only and should not be considered as professional tax advice. It is recommended to consult with a qualified tax professional for personalized guidance tailored to your specific situation such as BOMCAS Canada Accounting Firm.

Footnotes

Author: BOMCAS CANADA

Accounting firm BOMCAS Canada, which has its headquarters in Edmonton, is committed to transforming the routine of numbers into concrete success, opportunity, and prosperity. This mission acts as the compass that directs the operations of the organisation on a day-to-day basis. We provide our services to customers located all over Canada, including in the provinces of Alberta, British Columbia, and Ontario, amongst others, and we are motivated not only by an unwavering commitment to excellence but also by an expertise that is driven by a deep-seated passion for the work that we do. We are in no way, shape, or form comparable to any of the other accounting businesses out there.