Corporations have to give the government a portion of their profits in the form of income taxes, just like people do when they file their taxes. The Canada Revenue Agency (CRA) made the T2 Corporation Income Tax Return form so businesses could send their tax returns. Corporations are thus required to fill out this form.
To run a business well, you need to understand how corporate tax returns work. Even though preparing and filing company tax returns in Canada can be stressful and may take a lot of time, it is always worth it in the end because you can lower your overall tax liability and avoid any penalties that come with it. This guide to filing corporate taxes will help you make the most of your company’s many tax deductions.
However, there are a few exceptions to this rule, but all Canadian-based firms are generally required to file a corporate tax return. Crown businesses, Hutterite colonies, and registered charities are not required to do anything. Still, all resident companies, including non-profit organizations, tax-exempt corporations, dormant corporations, and active businesses, must file income tax reports, whether or not they owe taxes.
Companies that don’t live in Canada must file a return if they had taxable capital gains, sold Canadian taxable property, or did business in Canada. In some situations, non-resident corporations have to file a return every year.
Getting your corporation’s income tax return ready takes the least time and effort when you use the software designed for company tax returns. But if you want to file your taxes on paper, the form is much more complicated and needs to be filled out in several steps.
On the T2 form, you’ll be asked for a lot of information about your business, such as your business number and the address of the building where its books and records are kept.
In the next part, there are some questions for the reader to consider. If you answer “yes” to the question, you will need to add an extra schedule to your tax return.
Many questions are about tax credits that the company might be able to claim at different times during the year. Most companies have different schedules that go along with their return. Every business will have a Schedule 100 and 125 for the balance sheet and income statement, and most corporations will have a Schedule 50 for information about shareholders.
The Canada Revenue Agency (CRA) may require additional information, such as what the company makes or sells and how much of its total income comes from each product or service.
The T2 form lists the types of income that are taxed. The information shown here comes from a number of the first attached schedules.
The small businesses deductions clause lets small businesses privately owned by Canadians and considered small businesses claim a deduction, regardless of whether or not the businesses are connected.
Companies have more freedom when filing their taxes than individuals do. Your fiscal year end is set at the end of your first tax year. This is based on when you formed the business. Even though it’s a 12-month period, you can choose when it starts and ends.
Still, no matter when your tax year ends, you must file your tax return for that year no later than six months after the year has ended, and you must pay any possible back taxes within three months.