As the end of the year approaches, it's time to file your company's taxes! Yet, for new entrepreneurs, it can be difficult to determine where to start when this time of year comes around.
Moreover, it is possible to benefit from certain rules regarding corporate taxation during this period, as long as you do so before the end of the year.
In this post, we will give you our tips for a smooth fiscal year-end.
Prepare Your Business Taxes in Advance
Preparing your year-end business taxes is a tedious task that causes a lot of concern for entrepreneurs. To minimize the risk, it is highly recommended to plan in advance.
One of the main advantages is the ability to plan your tax strategies to maximize tax benefits. It also helps you better prepare compensation plans for the company's executive shareholders and better coordinate your individual financial planning strategies.
By preparing your business taxes in advance, you will get an estimate of the amount you will be required to pay at the end of the year. This way, you'll have the cash flow you need throughout the year to pay your taxes stress-free.
Another advantage is that it will allow you to avoid penalties for non-filing. The regulations impose deadlines for filing your tax returns. If you fail to meet these deadlines, you could receive a penalty that could put your business at risk. To avoid this type of stress, it is preferable to anticipate the preparation of your business taxes.
How to Prepare Your Business Taxes in Advance
Now that we've seen the benefits of preparing your fiscal year-end in advance, it's time to prepare your business taxes. And the best way is to be well-organized. Listing all your obligations as an entrepreneur will help you anticipate your goals and milestones for the year seamlessly.
Consult a Professional
If you want to avoid any stress caused by doing your business taxes, it is highly recommended that you find a tax accountant before your fiscal year-end. There are many benefits to having a licensed professional do this work for you.
With a thorough understanding of tax returns, a tax specialist is the best person to complete your business taxes smoothly and on time, limiting concerns about penalties for errors or delays. They can also advise you on the financial forecasts of your business to help you make the right decisions. Choosing to have your taxes done by a professional will save you time that you can devote to the development of your business and be better prepared for a possible business audit.
Key Dates to Keep in Mind
Meeting the deadlines for your tax obligations is very important. Here are the main documents and dates to follow in order to respect the law:
- Filing of corporate income tax returns 6 months after the fiscal year-end for incorporated business taxes (forms CO-17 with Revenue Quebec and T2 for Canada Revenue Agency);
- Filing of employer statements before February 28 of each calendar year (T4 statement for Canada Revenue Agency and R1 for Revenue Quebec);
- Filing of your GST/QST reports (contact Revenue Québec to find out your reporting period);
- Filing of dividend statements before February 28 of each calendar year (T5 statements for Canada Revenue Agency and R3 statements for Revenue Québec);
- Filing of T4A statements by February 28 of each calendar year;
- File Form T1135 on or before your income tax filing due date (foreign property).
Please note that these obligations do not include payment deadlines. In addition to the deadlines for filing, there are forms to be filled out, tax instalments, withholding taxes, etc. So don't leave it to the last minute.
Make Sure to Keep Track of All Your Transactions
It is important to ensure that you have properly recorded all your transactions for the taxable year in your corporate accounting. Make sure you have all the receipts to prove these transactions.
Using online accounting software can be a great solution to help you with this process . You can enter all the necessary information without having to worry about it being lost or stolen.
Review Your Corporate Financial Statements
Before you submit your business tax return, you will need to review your financial statements. Check each number and see if there are any that don't make sense. For instance, negative or imbalanced account balances are signs that an error may be hiding in your forms.
If this is the case and you are unable to identify the error in the software, you can always call on a tax accountant to make a revision of your financial statements.
Look Back and Think What You Can Improve
Once you've finished tracking and reviewing your numbers, take some time to think about what you achieved this year. Have you met your goals? What could you do to further grow your business? The results will speak for themselves and help you build your tax plan for the next year!
What Transactions Should You Finish Before the Fiscal Year-End or Roll Over to the Next Year?
The end of the fiscal year can be an opportunity to perform some additional actions or financial transactions that will be beneficial for your company.
Let's see what actions you can take?
Make a Capital Purchase Before the End of the Year
If you were thinking of purchasing capital assets in the next few months, consider doing so before the end of the fiscal year and save yourself a lot of money.
If these new assets are purchased and placed in service before the end of the fiscal year, you will be able to claim half the usual amount of tax amortization, or capital cost allowance. This will reduce your business income for the year, which means you will have less to pay.
Use this strategy even if your small business will be making losses this year, as you may be able to take full capital cost allowance for the following fiscal year.
Postpone the Sale of Capital Assets that Have Increased in Value
If your business was planning to sell capital assets with an accumulated capital cost allowance, it is probably best to postpone the sale until the next fiscal year. This will allow you to benefit from an additional year of capital cost allowance and postpone them from being included in the income for the company's taxation year for another year.
Celebrate the End of the Year with Your Employees
The end of the year, together with the holiday season, is often a time to get the whole team together and celebrate. Did you know that many of the costs associated with these types of social events are deductible? If the event is open to all employees, the costs do not exceed $100 per person and you do not exceed the limit of 6 events per year, the 50% limit generally imposed on the deductibility of meal and entertainment expenses does not apply.
It is good to know that if the cost of the event exceeds $100 per person, including transportation costs, the total amount including incidental expenses becomes a taxable benefit and must be included in the employee's income.
Let T2inc Handle Your Fiscal Year-End Corporate Taxes and Save Money
As you can see, fiscal year-end tax preparation is an important and unavoidable process for every entrepreneur. To minimize mistakes and stress, it's a good idea to prepare in advance by applying the above tips.
T1inc helps entrepreneurs and SMEs with their company's taxation thanks to its unique software solution. Our tax experts and corporate accountants can take care of your fiscal year-end tax preparation and ensure that you take advantage of all the deductions you are entitled to. If you need more information or have any questions, please do not hesitate to contact our team.
Frédéric Roy-Gobeil
CPA, M. TAX
As President of T2inc.ca and an entrepreneur at heart, I have founded many start-ups such as delve Labs and T2inc.ca. A former tax specialist at Ernst & Young, I am also a member of the Ordre des comptables professionnels agréés CPA and have a master's degree in taxation from the Université de Sherbrooke. With a passion for the world of entrepreneurship and the growth mindset, I have authored numerous articles and videos on the industry and the business world, as well as on accounting, taxation, financial statements and financial independence.
