The deadlines for filing corporate income tax vary depending on the corporation’s fiscal year end and what kind of corporation it is, but it’s very important to get your corporation’s T2 return filed on time because if you don’t, there are penalties. In general, a corporation has to file the T2 Corporation Income Tax Return within 6 months after taxation year end and payment is due within either 2 or 3 months after taxation year end.

The standard penalty for filing your T2 tax return late is 5% of the unpaid tax that is due on the filing deadline, plus 1% of this unpaid tax for each complete month that the return is late, up to a maximum of 12 months.

If the Canada Revenue Agency (CRA) demanded a return be filed and assessed a failure to file penalty in any of the three previous tax years, the penalty is even more severe;  10% of the unpaid tax when the return was due, plus 2% of this unpaid tax for each complete month that the return is late, up to a maximum of 20 months.

(These penalties apply to resident corporations, such as Canadian-controlled private corporations. Different penalties apply to non-resident corporations.)

Inactive Corporations Have to File Too

Remember that all corporations operating in Canada have to file a T2 corporate tax return each year, except for “provincial Crown corporations, Hutterite colonies, and corporations that were registered charities throughout the year”.

And remember, too, that even if you did absolutely nothing with your corporation all year, it still exists. Corporations don’t just lapse or fade into non-existence; the only way to “kill” a corporation is to formally dissolve it – and until this is done, it carries on and must file tax every year.

The CRA Might Waive the Penalties

The Canada Revenue Agency’s Taxpayer Relief Provisions provides details about  three specific instances where the Minister of National Revenue may decide to waive part or all of the penalties and interest.

(Note the word “may” – taxpayer relief is solely at the discretion of the Minister (and/or his designated official) and “each request will be reviewed and decided on its own merit”.)

The three specific situations are:

  1. Extraordinary circumstances, such as serious illness or accident, and natural or man-made disasters.
  2. The actions of the CRA. These include errors in materials provided to the public, errors in processing, and undue delays in resolving an objection or an appeal.
  3. Inability to pay or financial hardship. When payment of the accumulated interest a taxpayer owes would cause a prolonged inability to provide basic necessities such as food, medical help, transportation, or shelter, the CRA may cancel some or all of the amount owing.

These are not the only situations where penalties and interest may be waived;  just some of the specific instances where some or all of the penalties and/or interest owing might be cancelled.

How to Make a Request

You can use Form RC4288, Request for Taxpayer Relief to ask to have the penalties and/or interest your corporation owes waived or simply write out your request and send it to the tax services office serving your area.

Whichever way you make your request, be sure to include all the relevant information and documentation to support your request.