Incorporating Your Problems – Part 2 of 4: Dates to remember
Same disclaimer as before – memorize it.
A corporation can have a fiscal and tax year-end that is any time in the first 12 months of operation.
The due date for the first tax return (T2) is six months after that year end.
You may be asked for the year-end when you register for the business number. If you don’t declare it CRA will assume you want December 31 but when you file the first return you can adjust it. However, when you are registering for GST you will probably want an idea of when that year-end will be.
Taxes owing are due 3 months after the year-end on active income but be careful, if you have passive income you may have to have that tax paid 2 months after. These dates may or may not be April 30 or June 15 – they aren’t the same as the personal tax due dates.
I’m going to tell you that it is easiest to make your year end on the last day of a month. Most often, the last day of the month in the last half of the year. For the love of god, please try and avoid December 31 – you won’t get good accounting service that way and you create a problem with tax planning that you don’t need to have (see below).
But here are creative dates I’ve encountered:
- “My birthday”
- The date that CRA gave me because they said it had to be that way
- January 1 (who wants to be doing their books on New Years Day?)
- October 29 (because it wasn’t Hallowe’en)
- December 15 – and I’ve never figured out why
Why would you want one year end over another?
December 31 coincides with the calendar year end often makes it easier for clients to understand. However, as a public accountant, more than half of my clients had this as a year end which means they often found themselves competing to get things done in their time frame.
Sometimes clients have a year-end that is another month, like January or sometime in the first 12 months. They are often advised to do this to defer income.
If the year end is in July through November, they can leave open the opportunity for the use of bonuses in a more advantageous fashion.
Whatever year-end is chosen, any salary or director’s fees or dividends or shareholder drawings or other problems need to be reconciled. They need to be reported on the appropriate reporting form (T4s, T5s etc).
Other due dates:
Payroll taxes are due the 15th of each month with the final year payroll taxes for Tier 1 due January 15.
T4’s are due February 28 (2 months after the calendar year)
If you are distributing investment income you may have to issue T5’s and these are due February 28
If completing the T2057 for a s.85, it is due the first due date of the person or the corporation and is filed with both.
And those T4’s? Yes, you have to have them to CRA by the end of February but I’ve run across employers who refuse to give them to employees until months later. Let’s all have a DBAD* policy. Just do the right thing and get those T4’s out as soon as possible.
A few extra items of note: Do not leave your shareholder loan in a debit position. See s.15 of the Income Tax Act for why. Remember that the moment you take money out of the company, if it isn’t repayment of a loan previously made, you may be taxed on it. If you are taking draws against a fee, you will not only need to reconcile that but you will need to ensure that all payroll remittances are paid by January 15 (for most people).
*Don’t Be A Dick