INFORMATION IS STRENGTH
By nature, an entrepreneurial person can often feel like they are all alone. They have built a business based on the fact that they want to do things differently. Often this means they have questions about how to move their business forward but don’t know whom to ask. NVS is here to strengthen your odds of success. Below you’ll find several commonly asked questions with answers that may enhance your future financial outlook.
Below you’ll find our answers to some
commonly asked questions grouped by subject.
Can a small or mid-size company afford to work with an accounting firm?
Many small businesses are reluctant to get professional accounting help because they believe that it might not be worth the money. However, the fact that all big businesses have accountants means one thing: they realize the importance and value of sound financial advice. Anyone can benefit from working with an accountant– regardless of the size, scope or scale of your needs. Also, you will probably save more money over the long term working with an accountant because they will help you to control costs, avoid penalties for noncompliance with laws and regulations, and keep you from overpaying on your taxes.
I’m not a large company. So why would I need accounting services?
Businesses of all sizes must manage cash flows, create budgets, and pay taxes. An accountant can help you with all these things and much more. In fact, it is better to consult an accountant early in your business because they can assist you with getting a solid business growth plan in place.
Hasn’t technology removed the need for professional accounting services?
Accounting technology has come a long way since its inception, and some of the software available is quite useful. However, they cannot replace the judgement and expertise of a professional accountant, which can provide vital insights into a business. Technology enhances an accountant’s ability to help your company, not replace them. Also, while a business owner without accounting proficiency may be capable of handling some aspects of their company’s finances, they will never be able to get as much out of the technology as a trained accountant will.
Aren’t accounting and doing taxes are the same thing?
A common reason why some people choose not to pursue a career in accounting is that they mistakenly believe that they will spend the rest of their lives doing taxes. While some accountants choose to specialize in tax, the fact is that taxes represent only a small aspect of the accounting profession.
Accountants don’t have a vision. How can they help my business beyond the numbers?
When you envision the stereotypical accountant, you probably imagine someone who spends all day at their desk digging through invoices and going over spreadsheets. However, many companies are recognizing accountants for their ability to contribute to an organization’s success by consulting them about best business practices and optimal financial strategies. Also, since accounting is often considered to be the language of business, then you would expect that accountants can express their ideas better than most people.
Isn’t the accounting industry male-dominated?
It might come as a surprise, but women have a strong presence in the accounting industry and represent more than 60% of all accountants. Although this has not always been the case, the shift in workplace trends has affected extremely positive change within the accounting industry.
Aren’t accountants just good for calculations?
A common misconception is that accountants are mathematicians. However, the job of an accountant does not usually require any sort of complicated math like calculus. Accounting is about organizing and analyzing your finances, which does not require exceptional math skills. Most accountants possess strong business acumen rather than mathematical prowess, which allows them to provide practical solutions for businesses.
Isn’t accounting is an exact science? There’s no room for creative thinking.
Accountants have the liberty to choose policies, accounting methods, and financial analytics. Accountants usually innovate in every step they take while managing your business. Many companies acknowledge accountants for their distinctive and innovative contributions to the achievement of their organization.
Why would a business owner spend time on accounting when they can just give everything to a professional?
Accountants should be a valued resource for your company, not a catch-all. While accountants can keep track of the books and file taxes, they can do so much more. For example, they can provide you with business advice, strategize tax plans, ensure compliance with regulations, evaluate financing options, manage cash flows, and find ways to control costs. However, you must be involved directly in the financial aspects of your business to understand how the company is performing overall.
Do I need accounting reports to tell me how my business is performing?
Just because you are busy does not mean that your business is doing well. You could use reports to show you if your prices are where they need to be compared to your expenses being incurred. Also, you could run reports to reveal which areas of the business are profitable and which are problems. For instance, in the service industry, reports can indicate how time is being allocated, and if time is allocated poorly, money is being lost.
Is it unnecessary for private and small businesses to have audits?
This point of view may be correct for an owner-managed business. However, the other stakeholders should also be considered, such as lenders, investors, customers and the local community, because they will rely on the financial statements that you provide to them. Although an audit may not always be required for your business, there has been a recent shift for companies to be more transparent and offer additional information about tax liabilities, ongoing litigation, and going concerns. Also, audits are ideal for when you are considering selling your business as part of your retirement plans. There are several benefits to have an external audit completed, such as:
- You can demonstrate that you are serious about improving your business by being proactive and having an audit done.
- Audited financial statements provide the management with the reliable comparative financial information about their business. This financial information allows the business to be better able to make decisions based on historical trends.
- Auditors provide you with a management letter that identifies inefficiencies in the business’s operations and the areas that need improvement.
- Auditors obtain a detailed understanding of your business, which comprise of various internal factors and internal factors that impact the success/downfall of your organization. This information allows them to advise you on being aware of such factors, enabling you to work towards mitigating the risks arising from these factors.
- Third parties will have more confidence in the financial statements that you provide to them because they have been audited, and as a result, this may reduce the cost of doing business.
- Audits can promote an environment in which stakeholders are transparent with each other.
Why would Auditors be concerned with a companies future? They only focus on the past.
An auditor indeed reviews your past transactions that are included in the financial statements. However, audits can encourage an environment for change and expansion because business systems and processes will be improved as a result of an audit. Instead of viewing audits as an annoyance, they should be embraced because they may lead to efficiently run businesses and future innovation. Also, audited financial statements provide comparative information for a business to analyze trends and project future performance of the company.
Isn’t it the Auditor's responsibility to prepare the financial statements?
It is management’s responsibility to prepare the financial statements. However, the auditor is responsible for expressing an opinion on the financial statements. The auditor must comment on whether they believe that the financial statements are presented fairly, in all material respects, and following the applicable financial reporting framework. The auditor may suggest best practices for submitting and disclosing the financial information, but the onus is still on management to prepare the financial statements.
Don’t auditors just exist to make my life harder?
Auditors typically ask questions to gather information to understand your business better and consider risks that may impact the business. Any significant findings relating to the risks identified are communicated to management. Such data can be critical when making decisions on the future of the business, or to make improvements in the processes of the organization. While it is correct that auditors ask many questions, it is essential to remember that you are both working toward the same goal. That is the completion of an audit as effectively and efficiently as possible. When dealing with an auditor, the following should be considered:
- The company should designate one person to be the main point of contact with the auditors.
- Prepare for the arrival of the audit team by establishing meeting rooms and interview schedules.
- Take the auditors on a tour of your facilities.
- File documents in a way that makes it easy to retrieve when requested. Also, it is worthwhile to maintain period-end files for significant balances and transaction activities.
- Schedule the audit during a time when the key employees are not consumed with other internal projects.
- Summarize the major changes that occurred from the prior year, such as changes in accounting policies, regulation, management, operations, and strategy.
- Thoroughly review all the data files before submitting them to the auditor to ensure that the information is complete and to anticipate the questions that the auditors may ask.
Together, auditors and auditees should consider the following:
- Determine the appropriate timing for on-site visits and document requests.
- Have a short daily meeting to discuss the status of the file and whether any issues need to be addressed.
- Use a consistent format for prepared by client (PBC) listings.
- Work together to understand the reason why certain documents are being requested and if there could be a more efficient way to obtain the information from your financial reporting system that the auditor may not be aware of.
Auditors understand the importance of maintaining good relationships with their clients and try not to disrupt their operations or cause any undue stress. Typically, the audit partner has sufficient knowledge of the industry that the business operates in, and would have been exposed to the operations of similar organizations. This knowledge and experience of the auditors makes the experience smoother. The first year of an audit is usually the hardest, as it requires adjustments on both the business and the auditor's part, as they both understand each other’s style of operating. As you prepare for an audit, feel free to free to reach out to your auditors so that you can understand their goal and help them complete the audit promptly.
Don’t auditors’ spend 100% of their time crunching numbers?
This is a common misconception about auditing because many believe auditors primarily analyze financial statements. Although this is an essential part of an auditor’s job, it is not the only thing that they do. Auditors also spend a great deal of time meeting with clients, visiting the worksites, and researching the industries in which their clients operate. This additional knowledge allows auditors to better the day-to-day activities of the company that they are auditing. Further, auditors must be well-rounded because, in addition to crunching numbers, auditors exhibit business acumen, skepticism and the ability to think critically. Auditors provide any critical findings to the management who, in turn, can use this information for the decision making process.
Aren’t Auditors tied to their desks? How much can they really know about my business?
This misconception stems from the notion that auditors are portrayed as working alone at their desks while analyzing financial statements. This could not be further from the truth because auditors frequently meet with clients and often must travel to company sites both locally and globally. For example, NVS staff travel across Canada as well as Egypt, India, Mexico, and the USA to visit company sites. Once there, we perform inventory counts, work with various subsidiaries in those regions and are then able to report the findings to the parent entity that may be operating in a different part of the word. Since technology has made it easier to stay connected with clients and other stakeholders around the world, we can work remotely because our desk fits in our backpacks.
Do I have to claim interest if my bank didn’t send me a slip?
Banks are not obligated to issue a T5 if you earned less than $50 of interest for the year. However, it is still your responsibility to report all your income, even if you were not issued a slip.
Can’t I choose to claim your tuition credits when it works best for me?
You cannot choose when to claim your tuition credits because the calculation is done automatically on Schedule 11 of your tax return. If you earned enough income to claim this credit, then it will be used. Otherwise, you have two options. You can either carry this credit forward to the next tax year, or you can choose to transfer the credit to a parent, grandparent, or spouse/common-law partner. However, you must reduce your taxable income to zero before any portion of this credit can be transferred. If you choose to carry forward the tax credit, then please do not forget to include it in next year’s tax return, even if you still do not want to claim it.
Can’t I deduct my accountant’s fees for preparing my tax return?
You are permitted to deduct accounting fees if they were incurred for the purpose of earning business or property income. In all other situations, they will seldom be allowed. Also, the CRA has an income tax interpretation bulletin that talks about this topic in depth.
I have a balance owing. Did I mess my taxes up?
It may not be as exciting as getting a refund, but it is entirely reasonable to have a balance owing. This is common if you have more than one employer or have other types of income where tax was not deducted at source. However, this does not mean that a mistake was made when your tax return was completed. Further, keep in mind that a refund just means that the CRA was holding onto your money all year, and you are finally getting it back.
What’s the point of RRSPs if they tax you when you take it out anyway?
This is a popular statement that you would hear from someone who is retired and wants to withdraw money from their RRSPs because you are required to pay tax at your marginal tax rate whenever you make a withdrawal from your RRSPs. This means that if you wanted to spend $1.00, then you would need to withdraw at least $1.33 to net $1.00. However, what most people often forget is that they received a tax deduction when they made the RRSP contributions, and that was equivalent to the government lending them money.
Further, the tax deduction that they received when they made the contributions were likely to be larger than the amount of tax that they are required to pay when they make a deduction because they are likely to be in a lower tax bracket at this time. For instance, let’s say that their marginal tax rate was 36% when they made the contribution and 25% when they are ready to deduct these funds. This equates to an 11% return based on tax and does not consider any investment returns that they made. Sure, no one likes the thought of paying taxes but do not lose sight of the bigger picture because investing in RRSPs can still be advantageous.
Does it have to be the Mother that has to claim the childcare expenses first?
The spouse with the lower income is required to claim the childcare expenses, and this could be the mother or father.
Can I claim child support as a tax deduction?
This is true if your child support agreement is dated before May 1, 1997. In all other cases, the child support payments must be reported on your tax return, but they are neither treated as a deduction nor included in income.
Do I need to file a tax return if I worked outside of the country?
It does not matter if you worked outside of the country because the Canadian tax system is based on residency. You will be required to file a Canadian tax return if you have significant residential ties to Canada.
Can I claim my mortgage interest as a tax deduction?
This only applies to individuals who are self-employed and work from home because they can claim a percentage of their mortgage interest as a business expense. Also, there is an added benefit to owning a home because the principal residence exemption can be claimed when the house is sold, and this can result in zero capital gains being taxed.
Are U.S. investments are not subject to withholding taxes if they are held in registered Canadian accounts?
This is true for investments that are held in an RRSP because they provide tax-deferred pension or retirement benefits. However, the U.S. does not recognize TFSAs as providing these benefits and as a result, this means that any dividends paid by U.S. stocks will face a 30% withholding tax.
Won’t I increase my chances of being audited if I file my taxes online?
Since it is not always feasible to submit all your supporting documentation when you file your tax return online, the CRA might request that you send them through the mail. However, this is not an audit and should not be confused with one because they vary in terms of complexity and the amount of supporting documentation that is required.
Do Canadian citizens that live outside of Canada have to file a Canadian tax return?
Canadian citizens that live outside of Canada must file a Canadian tax return only if, during the year, they:
- Sold Canadian real estate
- Earned rental income from a Canadian property
- Carried on a business in Canada
- Were employed in Canada during the year
Does Canada levy taxes on non-Canadians who invest in Canada?
Non-Canadians eagerly invest in Canada because of the high return on investment here. Since they earned investment income, then they must file a tax return to report their investment income that was earned during the year. However, there are exceptions for Canadian dividends, Canadian interest income, and selling shares of a Canadian public company.
Don’t you automatically become a tax resident of Canada if you temporarily work in Canada?
If you stay in Canada for more than 183 days in any 12-month period, you will become a deemed resident of Canada. As a result, deemed residents are required to pay Canadian taxes on their worldwide income.
If a non-resident businesses sell to Canadian customers, aren’t they are required to pay Canadian taxes?
There is usually an exemption from Canadian income taxes because of the many tax treaties that Canada has with other countries around the world. The exemption is determined by whether the non-resident business has a fixed place of business in Canada. If they do not, then their business profits earned are not subject to Canadian income tax.
Aren’t Americans who work in Canada are taxed twice, once by the CRA, and then again by the IRS?
Americans who work in Canada will receive a foreign tax credit on their U.S. income tax return for the Canadian taxes that they paid. As a result, they will owe little to no tax to the IRS because the Canadian tax rates usually are higher than the American tax rates.
Will I risk getting a severe fine or even imprisonment if I come forward and declare income that I purposely did not declare a few years ago?
The CRA has a Voluntary Disclosures Program that many people have applied to take advantage of each year. If you have not filed a tax return for years or have not declared any income, you can come forward and not be liable for any penalties or prosecution. However, you will have to pay the taxes that are owed as well as interest. Also, the disclosure must be complete and made before the CRA starts to investigate you because it will be too late at this point. Further, the program permits you to make “no-name” disclosures through an authorized representative.
Aren’t employee stock options you purchased are tax-free?
If the stock options were below fair market value when you purchased them, then the difference in price should be included in your income, and this could push you into a new tax bracket
Is it true that all types of investment income are taxed the same way?
It is essential to have a tax strategy in place because not all types of investment income is equal. This results in income being taxed differently. It is suggested that you use tax-sheltered investments for the assets that generate revenue and are heavily taxed. It is also recommended to create a plan with a professional to reduce the amount of investment income that will be taxed, which will result in you keeping more of your income.
Isn’t it preferable to go with a TFSA than an RRSP?
Most Canadians believe that TFSAs are a better tax-saving vehicle than RRSPs because they are tax-free when you withdraw your money, which is not the case with RRSPs. However, TFSA contributions are not tax-deductible like RRSP contributions. For these reasons, it is wise to consult with a professional to determine the right option for you because each person’s situation is unique, and there is no clear-cut answer to this question.
Are the odds better that the CRA won’t audit you if your tax return was prepared by a professional?
Having your tax return prepared by a professional could reduce your chances of being audited, but it cannot guarantee that you will not be audited. However, the professional can represent you and interact with the CRA if you are audited, which will likely reduce your stress level.
Can I claim a flat-rate amount for my business mileage?
If you are self-employed, then you are required to keep a logbook with your mileage so that you could calculate the auto expenses for your business. Also, the CRA may ask to see your logbook, so ensure that you record where you are going and why.
Aren’t barter transactions are tax-free?
In barter transactions, goods and services are exchanged with no cash changing hands. Even though there is no cash involved, the CRA views barter transactions just like cash transactions, which means that they are subject to tax. The CRA also released Interpretation Bulletin 490 that discusses barter transactions in detail. To summarize Interpretation Bulletin 490, you must simply add the value of any good or service that you provide to your income if they usually are things that you would earn income from. For instance, if you are a mechanic and offer to repair someone’s vehicle in exchange for tickets to a hockey game, then you must add the amount that you would usually charge for repairs to your taxable income.
Can’t I write everything off because I work for myself?
Just because you are self-employed does not mean that you can claim everything as a business expense. However, the CRA expects you to incur reasonable expenses while carrying on a business. The issue here is that most people do not understand what is reasonable. For example, let’s consider someone who works from home and uses the internet to do business, and it is also available to everyone living there. In this case, it would not be correct to claim the entire internet amount as a business expense because there will be some personal use of the internet as well. Therefore, you must determine what percentage of internet use is personal and what fraction is related to the business.
Can’t I claim 100% of the GST/HST paid on a meal as an Input Tax Credit (ITC)?
Unfortunately, for meals and entertainment, only 50% of the GST/HST paid can be claimed as an ITC because only 50% of the meals and entertainment expenses can be claimed for tax purposes. However, you do not have to manually calculate 50% of the GST/HST every time because an accountant can adjust the sales tax for meals and entertainment in your accounting software.
Is it a big deal if I pay for some business expenses out of my own pocket?
It is because you can get that money back tax-free. However, you must note when you paid for an expense personally and keep your receipts. This way, an accountant can keep track of what is owed to you by the business and the company can reimburse you for it when the cash flow of the company permits it. Also, it would be easier to determine the true profitability of the company if all the expenses were recorded.
Can I claim the SR&ED tax credit if I don’t have a dedicated R&D facility or staff?
Some companies think that they do not qualify for the scientific research and experimental development (SR&ED) tax credits for these reasons, but this is not always the case. For instance, your company can conduct qualifying R&D activities in Canada while using the same standard facilities. Also, you can claim for SR&ED tax credits based on the percentage of the employees’ time that was spent on R&D in Canada.
Isn’t it pointless to claim SR&ED tax credits if I don’t have any taxable income?
You may be eligible for refundable tax credits if your company is a Canadian Controlled Private Corporation (CCPC) with net income below $500,000. This means that you can get a refund even if you do not have any taxable income against which to use the tax credits. Also, for non-CCPCs that do not have any taxable income, they can claim the tax credits and carry forward the amount to use against taxable income in subsequent years.
Can I file for the SR&ED tax credit if I missed the deadline?
You have 18 months from your fiscal year-end to apply for the SR&ED tax credit. Failure to meet this deadline can result in lost credits. However, in certain circumstances, you may still file to claim this credit after the deadline.
If my company does engineering, but not research, can I claim the SR&ED tax credit?
If engineers experiment with untested methods of production or design, then this testing may constitute as research and development. Also, the results of the engineer’s endeavours do not matter because their attempts would count as technological advancement. The knowledge that was gained about what works and does not work is scientific. Always talk to an expert to determine whether you are conducting any activity that constitutes as research and development because there may be tax credits that you could be entitled to.
If I didn’t formulate a hypothesis at the beginning of your testing, and thereby cannot be considered to have followed the scientific method, can I still claim for the SR&ED tax credit?
Your hypothesis does not have to be in writing before you conduct your research or experimentation. A theory can be properly crafted after the experimentation is completed because most of the testing is done using an implied hypothesis. You may still be eligible to claim for the SR&ED tax credits even though you did not make a statement of the hypothesis before starting your research or experimentation. Also, it is advisable to speak with an SR&ED expert about your eligibility so that they can guide you through the entire process.
Mergers and Acquisitions
Is my company too small for anybody to be interested in?
That was the case in the past, but recently things have changed, and it is not uncommon for smaller deals to get done. If you think that you are too small, it does not hurt to contact an acquirer to see if they are interested because you would not know for certain unless you ask them. Also, you can try to build relationships with acquirers so that they could understand your business and realize that you have more to offer to them than just the size of your company.
For growth-stage companies, isn’t it better to build than buy?
All companies must continue to grow, and the pressure to grow your business as quickly as possible has never been higher. Moreover, this process entails attracting more customers, developing new products, scaling operations, and hiring the right people. As a result, this method takes a long time and consumes a lot of the company’s valuable resources. However, M&A could help smaller companies achieve these goals much faster than organic growth.
Isn’t my company too small to think about M&A?
There is not an exact time to start thinking about M&A. Unfortunately, many owners believe that their companies are not large enough for M&A, and this is due to their lack of experience in this area. However, this is not a valid reason to avoid M&A discussions. Having a strategic approach to M&A is more important than waiting for the right time because there is not a perfect time to start considering M&A. Also, having the right strategic advisors and support cast in place can make the M&A process much more manageable.
Won’t M&A distract my company from its core strategy?
Like any other strategic initiative, M&A requires many resources, but it does not have to be a distraction. For instance, investing early in your core operations such as your processes and people will provide management with the time to focus on M&A when they are needed. Also, it is essential to work with legal and financial experts who are experienced in M&A because having them on board would reduce the amount of time that management would have to dedicate to M&A since they can help to guide you through the process.
After I sign the letter of intent (LOI), is the negotiating process over?
The negotiating process will continue until the deal is finalized because there will be many details that must be ironed out while drafting the purchase agreement. Also, there may be additional issues that need to be addressed during the due diligence process that was not known initially.
Don’t all Mergers and acquisitions need to be completed within six months?
Although this can happen, it is not likely to occur because most deals will take at least a year to complete. This reason for this is because it requires a lot of time to conduct market research, develop a strategy, identify potential companies, and perform due diligence. Further, none of these steps should be rushed because they could adversely affect the outcome of the entire process.
Shouldn’t I wait for a buyer to contact me first instead of me contacting them?
Since selling your business is a significant decision that you will eventually have to make. It is better to be proactive and seek out the right buyer than to wait for one to contact you because there are many stakeholders involved, such as your employees, customers, and investors. It is crucial to identify, reach out to, and build relationships with companies that might be potential buyers of your business because they may not even be aware of your company or the fact that you are thinking about selling your business. Also, this approach prevents you from making a rash decision because you would have enough time to think about the offer and not feel pressured to agree to the first deal that was presented to you.
If I merge or am acquired, won’t I will lose control of my business?
It is not true you will have to exit your company as a result of M&A. That said, it is not uncommon for the acquirer to keep some of the leadership in place after a deal closes because no one understands the business like its founder and key executives. Moreover, some acquirers will encourage the owners to stay with the company and give them the autonomy to continue to run the business as if it were still theirs.
Tax Deadlines and Key Dates
Deadline to issue tax slips
T3: Statement of Trust Income Allocations and Designations
Financial administrators and trustees must prepare and issue T3 slips by March 31st. The T3 slips are issued on a calendar basis and indicate the amount of investment income (interest, dividends, and capital gains) that was earned from mutual funds in non-registered accounts and from certain trusts.
T4: Statement of Remuneration Paid
Employers must file a T4 information return (T4 Summary and T4 Slips) to report remuneration paid. The return is reported on a calendar basis and must be filled by the last day of February in the following year.
T5: Return of Investment Income
Banks and financial institutions must file a T5 return (T5 Summary and T5 Slips). The T5 reports the different types of investment income (interest, dividends, and royalties) paid to residents of Canada, both individuals and corporations. The return is reported on a calendar basis and must be filled by the last day of February in the following year.
NR4: Statement of Amounts Paid or Credited to Non‑Residents of Canada
The NR4 return (NR4 Summary and NR4 Slips) reports amounts paid or credited (royalties, dividends, interest, management fees) to non-residents that are subject to Canadian withholding tax. Specific amounts paid or credited to non-residents must be reported in the NR4 return, even if they are exempt from non-resident withholding tax. For example, certain royalty payments may be exempt according to a tax treaty. The return is reported on a calendar basis and must be filled by March 31st in the following year.
NR6: Undertaking to File an Income Tax Return by a Non-Resident Receiving Rent from Real or Immovable Property or Receiving a Timber Royalty
Non-residents that receive rent or timber royalty payments in Canada must submit an NR6 form to the CRA by January 1st of each year or before the date that the first rental payment is due.
Personal tax filing and payment deadlines
Deadline for filing for individual taxpayers: April 30th
Deadline for payments for individual taxpayers: April 30th
Your tax balance is due on April 30, 2021, except if you have specific circumstances, such as a second job or revenue from income property, that require you to pay taxes by instalment.
Deadline for filing for self-employed taxpayers (and their spouses or common-law partners): June 15th
Deadline for payment for self-employed taxpayers (and their spouses or common-law partners): April 30th
Even though the deadline for filing is later, self-employed taxpayers (and their spouses or common-law partners) are still required to pay any taxes owing by April 30, 2021.
Deadline for filing and payment by deceased taxpayers:
If a person died between January 1st, and October 31st, their tax return must be filed by April 30th. However, if a person died between November 1st, and December 31st, their tax filing and payment are due six months from the date of their death. For example, if a person died on November 25, 2019, then their tax filing and payment would be due by May 25, 2020.
Deadline for filing and payment for deceased taxpayers who were carrying on a business at the time of death:
If a person died between January 1st, and December 15th, and their business was active at the time, their tax filing is due on June 15th. If a person died between December 16th, and December 31st, their tax filing and payment are due six months from the date of their death. For instance, if a person died on December 20, 2019, then their tax filing and payment would be due by June 20, 2020.
Deadline for paying personal tax instalments in 2020 are:
- March 15th
- June 15th
- September 15th
- December 15th
Corporate tax filing and payment deadlines
Deadline for filing corporate tax returns:
Corporate tax returns must be filed within 6 months after their year-end.
For example, a corporation with a December 31, 2020 year-end would have a June 30, 2021, due date.
Deadline for payment of corporate taxes owing:
Corporate taxes owing are due within two months after their year-end. However, there is an exception to this deadline. Corporate taxes are due within three months after their year-end if the following criteria apply:
- The corporation is a Canadian Controlled Private Corporation (CCPC).
The corporation claimed the small business deduction for the current or previous year.
The corporation and all associated corporations (if applicable) had taxable income less than $500,000 in the previous year
Deadline for paying corporate tax instalments:
Instalment payments are due on the last day of every complete month of your tax year, or of every complete quarter if you are an eligible small CCPC. The first payment is due one month or one quarter less a day from the starting day of your tax year. For example, if your tax year started on January 1, 2021, then the first payment would be due on January 31, 2021.
T1134: Foreign Affiliate Reporting
Canadian corporations with foreign affiliates must file an annual T1134 Information Return (T1134 Summary and T1134 Supplements). A separate supplement must be submitted for each controlled and non-controlled foreign affiliate unless the foreign affiliates meet specific exemption criteria. The return is due within 15 months of a corporation’s taxation year-end. For example, a corporation with a December 31, 2019 year-end, the return must be filed by March 31, 2021.
T661: Scientific Research and Experimental Development (SR&ED) Claim
Since SR&ED tax credits are claimed on a taxation-year basis, a corporation has 18 months from the end of a taxation year to file its claim for that particular year. Unfortunately, extensions are not permitted, and if a corporation files late or submits an incomplete claim, then the claim for SR&ED tax credits will be denied. It is recommended to file at least three months before the 18-month deadline to allow time to provide the CRA with any requested additional information before this deadline. For a corporation with a December 31, 2019 year-end, it has until June 30, 2021, to file a SR&ED claim for that taxation year.
T106: Information Return of Non‑Arm’s Length Transactions with Non-Residents
Canadian corporations must report transactions with non-arm’s length non-residents by filing an annual T106 Information Return. For corporations with a December 31, 2020 year-end, the T106 Return must be submitted by June 30, 2021.
T1135: Foreign Income Verification Statement
For each taxation year during which a Canadian taxpayer held “specified foreign property” of more than $100,000 at any time in that year, a form T1135 must be filed. Specified foreign property may include foreign bank accounts and investments, indebtedness receivable from non‑residents and other property held outside Canada. If the total cost of the taxpayer’s specified foreign property is less than $250,000 throughout the taxation year, the taxpayer can report the property using the streamlined information reporting requirements on Form T1135. The form must be filed within six months of a corporation’s taxation year-end. For instance, for a December 31, 2020 year-end, the form T1135 must be filed by June 30, 2021.