Being your own boss is a great experience, and watching your business grow after putting in all that hard work, dedication, and effort definitely has its own rewards. While you’ve got your business operations locked down, it’s equally important to stay on top of your taxes. When you have an incorporated or limited company, your tax filing obligations are a little different.
Filing Your T2 Taxes
Along with a T1 General personal tax return (which you should have already filed by the tax deadline of April 30th), you will also have to file a T2 Corporate Tax Return for your incorporated business. You must file both because a corporation is considered a separate legal entity with the ability to own property and enter into binding contracts in its own name. Keep in mind that your incorporated business-related income and expenses are claimed on the T2 return and not on your T1 personal tax return.
Any business losses you incur in your corporation – known as non-capital losses – cannot be deducted against your taxable income on your T1. However, non-capital losses from your corporation may be carried back 3 years or carried forward 20 years (for tax years after 2005) to offset corporate business income on the T2 return.
Corporate Tax Return Deadline
Your T2 corporate tax return is due within 6 months of the end of your business’s fiscal year. Your fiscal year might be the same as the calendar year but doesn’t have to be. For example, if your business’s fiscal year runs from April 1 to March 31, then you must file your T2 by September 30. If your filing deadline is on the weekend or a holiday, it can carry over to the very next business day.
Helpful Tips for Filing
As with any process, careful preparation and planning can help make it easier. Here are a few things you should keep in mind when filing your T2 corporate tax return:
- Get Organized – it’s easier to get your return filed once everything is in order. Start by filing your expenses records by month, and sorting your bank and credit card statements.
- Keep track of all your transactions – maintain an up-to-date file so that at any point in time you’re well aware of your revenues, expenses and net income. This includes records such as articles of incorporation, invoices, receipts, bank statements, deposit slips, agreements and letters from the Canada Revenue Agency.
- File on time to maintain a good record – not only is it a good business practice, but it also gives you fewer reasons to worry about your books being in order.
- Financial Statements – have your company’s Income Statement and Balance Sheet ready.
Tax Forms and Schedules
You can download and print all the documents you need through the CRA’s website by clicking on T2 Returns and schedules. The link will give you a list of various corporate tax forms and schedules that you may need to prepare your T2 Corporation Income Tax Return. Some of the most commonly used schedules are:
- Schedule 200 – T2 Corporation Income Tax Return
- Schedule 50 – Shareholder Information
- Schedule 8 – Capital Cost Allowance
- Schedule 1 – Net Income for Tax Purposes
- Schedule 24 – First-time Filer after Incorporation
- Schedule 100 – Balance Sheet Information
- Schedule 125 – Income Statement Summary
- Schedule 3 – Dividend Received, Taxable Dividend Paid, and Part IV Tax Calculation
- Schedule 11 – Transactions with Shareholders, Officers or Employees
Remember, nothing is as big of a challenge as it looks if you are well-prepared. What’s more, you’ve got one of the industry’s best tools to help you out. With step-by-step guidance and free internet filing, TurboTax Business Incorporated makes filing your T2 tax return easier and faster than ever.