In most cases, businesses use the calendar year as their fiscal year. However, in certain cases, you can elect to have a non-calendar fiscal year. If you use a non-calendar fiscal year, it has to meet certain criteria established by the Canada Revenue Agency. The exact rules vary depending on the structure of your business.
Sole Proprietors and Partners
If your business is a sole proprietorship or partnership, you typically need to use a calendar fiscal year. However, you can submit a request to the CRA to use a non-calendar fiscal year.
To request the use of a non-calendar fiscal year, fill out Form T1139, Reconciliation of Business Income for Tax Purposes.
- This form prompts you for information on your business income and the date you want to end your fiscal year.
- You can use this form to elect a calendar or non-calendar fiscal year, but approval is not guaranteed.
- The CRA accepts these requests on a business-to-business basis.
Unfortunately, if you have a partnership and one or more of the partners is a corporation or another partnership, you cannot make this election.
Corporations may choose any dates for their fiscal period.
- However, their fiscal period must not be longer than 53 weeks or the equivalent of 371 days.
- If this is your business’s first year as a corporation, you can choose any date to end your tax year as long as it does not exceed 53 weeks from the day you incorporated.
For example, imagine you incorporated on June 1. You could opt to carry on a half of a year of business and file your corporate tax at the end of the calendar year. Alternatively, you could name May 30 of the following year as your year-end date and use a fiscal year that runs from June 1 to May 30.
Income Tax Filing Deadlines
If you use a calendar fiscal year, your tax is due on or before April 30 of the year following the year for which you are filing.
However, as a self-employed individual, you don’t have to actually file your income tax return until June 15 of that year. The CRA extends the same deadline to your spouse or common-law partner. Note that if you file on June 15 and owe tax to the CRA, your tax bill will be assessed interest and late payment penalties as of April 30.
If you use a non-calendar fiscal year, your income tax and return are due on or before the same day of the sixth month following the end of your business’s fiscal year. For example, if your fiscal year ends on Feb. 15, your income tax return and tax owed is due by Aug. 15 of the same calendar.