Why does one need a corporate tax accountant in Brampton?
What is a corporate income tax?
Corporation Tax is a federal and provincial income tax for companies operating in Canada. Federal income tax is filed as a T2 corporate tax return, but each province has its own way of handling provincial income tax.
Who must file the Canadian corporate tax return?
All companies operating in Canada must file a T2 declaration, including non-profit organizations, tax-exempt companies, and inactive companies. So even if your Company has no income per year, if that Company exists, the taxes must be filed.
Who has to pay corporation tax?
Most companies in Canada will have to pay corporate income tax.
Even if your business isn’t actually in Canada, you may have to pay corporation tax in Canada if your business:
- operates in Canada
- had a taxable capital gain
- Transferred Canadian taxable property.
Some companies do not have to pay corporate income tax
Tax-exempt crown corporations, Hutterite colonies, and registered charities do not have to file or pay Canadian corporate income tax (but each have its own unique government filing obligations).
How much corporate income tax do you have to pay?
The corporate income tax rate varies depending on the size of your business and the province in which you are located.
The basic tax rate for all companies is 38% of the taxable income; this is called the Part 1 tax.
However, income earned in Canada is eligible for a federal tax cut, which reduces Part 1 corporation tax to 28%. Additional tax deductions and tax credits are available – check this CRA page to see if you are eligible for any of them.
Good news for small businesses
Sometimes the benefit is being a kid: Canadian-owned and controlled small businesses can benefit from a small business deduction, reducing the tax rate to 10.5%. The business limit for a small business deduction is $ 500,000, which means business income of up to $ 500,000 is eligible for the small business deduction.
The CRA provides a worksheet for a quick business tax estimate, but it’s best to work with a CPA to get the most accurate assessment possible.
Provincial corporation tax rates vary from province to province, and like a federal tax, each province also has a low and high Canadian corporate income tax rate. Below are the tax rates for your province:
- Newfoundland and Labrador
- Nova Scotia
- New Brunswick
- Prince Edward Island
- British Columbia
- Northwest Territories
Quebec and Alberta currently have no corporation tax agreements with the CRA, but you can find out their provincial corporate tax rates on their websites:
Presentation of corporate income tax
In Canada, your Company’s tax year and income level will affect when and how you file corporate taxes.
Deadlines for submission
You must file a tax return within six months of the end of the tax year.
If your fiscal year ends on the last day of that month, your taxes are due six months later, on the last day of that month. However, if your fiscal year ends in the middle of the month, your taxes are due six months later, on the same day of that month.
Here is an example: If your fiscal year ended on December 31, 2017, you must file your taxes by June 30, 2018. If your fiscal year ended on December 4, 2017, the deadline for filing is June 4, 2018.
The due date falls on a weekend or public holiday but can be sent on time on the next business day following the due date.
Are you the forgetful type? It turns out that the CRA has created an application for this. The CRA Tax Reminders application is designed to help you keep track of all the data you need to file and pay your business taxes.
How to set up
Use CRA’s My Business account (for entrepreneurs) or represent a customer (for employees and agents) to file corporate income tax. If you wish to submit a paper copy of your corporate taxes, you can also print a declaration with a T2 barcode and submit it with the declaration. You can take the help of a corporate tax accountant in Brampton.
Electronic filing is mandatory for businesses with gross annual income exceeding $ 1 million. If you haven’t noticed, CRA loves exceptions, and the right way to file corporate tax is no exception.
How to pay corporate income tax
Now that you know how much to pay and when to apply, let’s take a look at how to actually get money in the CRA.
Companies in Canada pay taxes in installments, so the payments are spread out on a yearly basis. They can be done monthly or quarterly. It may not be necessary to pay in installments for new companies or corporations that owe taxes of less than $ 3,000 per year.
To calculate your installments, the CRA has created a series of worksheets to help you with the process: one to estimate your 2018 taxes, one to calculate your monthly installments, and one to calculate your quarterly installments.
Terms of payment
You can pay by debit, pre-authorized debit, online banking, credit card, wire transfer, service provider, cash, or at your Canadian financial institution. Basically everything except bitcoin. You must also pay in Canadian dollars.
Detailed instructions for each method can be found in the CRA program.
Tax balance at the end of the year
Even if you have made payments during the year, you can still pay your CRA balance after tax at the end of the year. Generally, the balance of corporate income tax is due two months after the end of the fiscal year. We know we’re starting to sound like a broken record, but it turns out (you guessed it) there are exceptions.
In cases where you think you are being revalued for the previous year, you can also pay down payments. To do this, you will need a specific payment voucher from the CRA.
Advance payments can be made for the following reasons:
- amount due
- Reimbursement of an unverified tax year on your business account
- Payment for an unvalued period on your GST / HST account
- Payment due to the employer’s account
Beware of sanctions
It seems obvious that late payment of taxes will be associated with penalties, but there are other less obvious penalties that need to be resolved.
Penalties for late submission
If you do not submit the T2 fees on time, you will be penalized. These penalties amount to 5% of the amount due in your taxes plus 1% more for each full month that your tax return is overdue. The late filing penalty could go up to 10% if the CRA submits a filing request if the application was also not filed in any of the three previous tax periods.
The lesson here is basically to submit your taxes on time; your future self will thank you for it.
Penalties for late payment
Interest on overdue or insufficient installments is added daily.
If your business’s overdue interest exceeds $ 1,000, it may be subject to additional penalties.
Financial penalties are also punishable for false declarations, omissions of data in the tax return of companies, omitted tax returns, or for help or advice to those who make a false statement. More information on sanctions is on the CRA website.
Occasionally, the CRA may waive penalties if exceptional circumstances, such as floods or deaths among your close relatives, prevent you from filing your tax return or paying taxes in a timely manner. But extraordinary really means extraordinary: “I was too busy and forgot” or “I lost the Internet” definitely don’t count.
There are no small words: filing corporate taxes is complicated. We strongly recommend that you work with the CPA to make sure you send and pay the right amount at the right time and get all possible deductions.
And if your books are out of date, our accounting service can give you much-needed relief during the most stressful time of the year.
What is WebTaxOnline?
We are an online accounting service powered by real people. The bench will provide you with a specialized accountant supported by a team of experienced small business experts. We’re here to get rid of your business for good. Each month, your accounting team imports bank statements, classify transactions and prepares financial statements.
If your Company is registered in the Business Register or registered GST / HST, then the My Business account is for you. In addition to viewing your income tax, your My Business account allows you to manage your payroll, store returns, view account balances, and manage direct debits. You can also archive or edit GST / HST returns and check account balances. Other services include accessing authorization for representatives, such as accountants, the ability to submit documents in electronic format, and the submission of excise tax returns.
What can be written off as operating expenses? In short, all the costs necessary for running your business can be deducted as business costs. The opposite of business expenses is personal expenses which cannot be deducted. Sounds easy, right? If so, this chapter would not have existed. Small business accounting has a lot of reservations and can be difficult to navigate. We will first look at specific examples of typical small business deductions available to Canadian entrepreneurs.
Things your accountant would never want you to do:
- Throw your receipts in the trash, even if you’ve already declared your taxes. Receipts must be kept for at least six years in case of an audit.
- Rely on estimates when presenting expenses
- Try to do it all by yourself. Feel free to seek help from a professional accountant.
- Rely on estimates when submitting expenses. Feel limited if the CRA doesn’t list certain expenses on its website. The CRA’s definition of the cost of business is “any reasonable ongoing expense that you have paid or will have to pay to earn business income,” so if in doubt, consult your accountant or the CRA directly to see if your expense may be admissible.
- While the tax assistance process as a small business owner can be daunting, help is available. Once you have an overview of what you can and cannot cancel in your tax returns, we need to look now
As a business, paying taxes on a monthly basis can help you manage your cash flow and stay on budget, says a tax expert. Unlike separate ownership – which is the case when you are a business – a registered company is a separate legal entity. Since companies can use a non-calendar fiscal year, the filing term is six months after the end of the year. However, as many businesses have chosen to use the calendar year, June 30 is a very common filing date.
Doing business in a company has its own unique barriers. Here are four tips for preparing corporate taxes, whether you have become the sole owner or a newcomer to the business world:
- KNOW WHEN TO PAY
If you are self-employed, you are required to pay taxes to the Canadian Tax Agency (CRA) in quarterly installments. If your business does not meet certain criteria, it is actually required to pay the installments on a monthly basis. Monthly payments can be beneficial for your business, even if the Company qualifies for quarterly payments.
- MAKING GOOD RECORDS
Another important tip is to hire a good corporate tax accountant. “Many of the clients I’ve seen over the years think they can do it,” she says. “I told the doctor he was trying to keep his bills. He didn’t stick to the needles, so he shouldn’t have to do the accounting.”
It is important to realize that good accounting is extremely important to anyone doing business, as well as having a good record-keeping system where you can find things easily.
“When the CRA comes to look at something, the burden of proof doesn’t fall on the CRA; the burden of proof rests with the taxpayer to prove his position,” “You must be able to find all your receipts, journals, and documents.”
- DISCOVER THE ACCOUNTING SOFTWARE
Are you ready to accept the change? For technically friendly business owners, the new accounting applications and software are even easier to use. Many of them now have a cloud option, so you can place your work in the cloud and access it from anywhere.
“We see this becoming extremely useful and revolutionizing the accounting industry. “Some of these common programs, such as QuickBooks, have applications that not only simplify some of your accounting processes but also help you with a variety of business activities, such as inventory tracking, customer billing, contract signing, and loading receipts. All of this can be archived online. “
- DON’T BE INVOLVED IN TAX DEDUCTIONS
It is a myth that if you are a legal entity, you can deduct much more than as the sole owner. Most of the tax rules for calculating business income are the same for companies. He recommends looking out for some common pitfalls, such as home office and vehicle deductions.
“People assume that working on a kitchen table means they can deduct a lot of household expenses,” he says. “There is real legislation, and here are the criteria: it has to be a separate room designed to be a home office … and you have to use the home office more than 50 percent of your time.”
The second trap is people giving their vehicle to the Company so they can deduct it as a business expense. The problem is that if you use this vehicle for any personal use, the percentage of time used for personal purposes becomes a taxable advantage. The result can be particularly unfavorable if the Company owns a car rather than a lease.
“The CRA walks in and says, Is Je parked in your driveway? It is available for your use. One piece of advice to get around this would be to not put yourself in the Company. What you should do is pay the amount that the CRA says you are allowed for commercial purposes. “
What are taxable transactions?
Most goods and services in Canada are taxable supplies. This includes everything from auto repairs, hotel accommodation, clothing, and footwear to legal and accounting services. Most of these items are subject to a full 5% GST rate. Some goods and services are classified as “zero rates” supplies; that is, they are subject to a 0% tax. Zero-rate supplies include staple foods, prescription drugs, and some goods and services sold to customers outside of Canada. Other supplies are still non-taxable, such as daycare services and rents. If your business sells taxable supplies in Canada (at 5 percent or 0 percent), you must register for GST / HST unless you are a small supplier.
When (and how often) do you administer GST / HST?
The first step is to find out when to return. The CRA assumes that you report your GST / HST returns once a year. You can choose to report more often, but most small businesses may not report more than once a year. Once you have signed up for your GST / HST number, CRA will send you a customized GST or HST return form that includes the date you need to submit your return. If you are the sole owner, the deadline for filing the GST / HST tax return and for making any outstanding payments is usually in line with the deadline for filing the individual tax return. Your personal tax return form will confirm the deadline for filing your tax return. Businesses usually have the same fiscal year-end for income tax and GST / HST purposes. If a company wishes to manage another GST / HST fiscal year, it must obtain approval from the CRA. If your business has a fiscal year-end (e.g., December 31), your GST / HST tax return must be filed by June 15 of the following year, and payment must be made by April 30 of the year following. If your business has a non-calendar fiscal year-end (i.e., a date other than December 31), you must file a GST / HST tax return and pay no later than three months after the end of your fiscal year. While most companies submit their GST / HST returns annually, others report more frequently (monthly or quarterly). For more information on when to file a GST / HST tax return, visit Revenue Canada.
Let’s get in touchIf you are looking for high quality bookkeeping services for your small business in Canada and are also looking to minimize your bookkeeping costs for your small business then send us a message with your inquiry or call us today.
Who must file the corporate tax return (T2)
All resident corporations (except tax-exempt crown corporations, Hutterite colonies, and registered charities) must file a T2 declaration for each fiscal year, even if no tax is payable. Includes:
- A non-profit organization
- Companies exempt from tax
- Inactive companies
A non-resident company must file a declaration if any of the following occurs at any time of the year:
- operated in Canada
- had a taxable capital gain
- sold Canadian taxable assets
This requirement applies even if the Company states that any gains or gains made are exempt from Canadian income tax due to the provisions of the tax treaty.
A non-resident company that has had a taxable capital gain or disposed of Canadian taxable assets is not required to file a declaration if the divestiture meets all of the following criteria:
- According to Part I, no tax is payable for the tax year
- The Company is not obliged to pay any amount under the law for any previous tax year (except the amount to which an adequate guarantee is applied under § 116 or 220)
- Each Canadian taxable asset sold in a fiscal year is:
For the property excluded under § 116, or
For properties for which a certificate under Section 116 has been issued
The definition of Canadian taxable assets excludes corporate shares and certain other interests that do not derive their value during the 60-month period ending at the time of determination primarily from real estate or immovable property located in Canada (including Canadian mining assets and properties of timber resources).
Other situations may require non-resident companies to file a T2 declaration, including:
- upon submitting the NR6 form, a tax return from a non-resident who receives rent from a real estate or immovable property or receives royalties pay Part I tax on the net amount of the income from royalties or income from letting from the real estate according to § 216 par 4 for the current year, and we have approved it
- upon submitting Form T1288, a non-resident of Canada (corporation) requesting a reduction in the amount of non-resident tax to be deducted from film or video production income to pay Part I tax on the net amount of acting under paragraph 216.1 (1) for the current year and we have approved it
While none of these requirements apply, a non-resident company may wish to file a declaration if any of the following occurs:
- When you want to ask for a refund
- when it is decided to pay Part I of the tax on the net amount of royalties or rents referred to in paragraph 216, paragraph 1, for the current year
- If you wish to decide to pay Part I of the net amount of the acting services under subsection 216.1 (1) for the current year
Non-resident corporations are required to present their T2 performance, plans, and general financial information index in Canadian funds only. They cannot be deposited in the functional currency pursuant to section 261.