Business owners often agree that filing business tax returns is not the most enjoyable part of running a business. Despite this, fulfilling your duty to the federal and provincial tax authorities is an obligation that no company should shirk.
If you operate a business in Quebec, it is important to take this responsibility seriously, since there are many consequences of late payment of business taxes that can be quite debilitating for an organization.
Filing federal taxes late
The CRA (Canada Revenue Agency) is the ultimate authority on corporate taxes at the federal level. It sets the important dates to be respected, as well as the amount of penalties that a company must pay in case of failure to file a tax return or to pay the amounts due in taxes.
In the following sections, you will find most of the information you need to know if you want to avoid suffering the consequences of filing your federal taxes late.
When do I have to file my federal corporate income tax return (T2)?
According to the CRA, a corporation must file its T2 tax return within six months of the end of each taxation year. A corporation's tax year is its fiscal year.
In other words, unlike individuals and self-employed workers who must all file their returns by a specific date depending on their status, businesses do not all have the same deadline.
Small clarifications concerning the filing deadlines for the T2 return
- Where a tax year ends on the last day of a particular month, the business must file the return by the last day of the sixth month following the end of that tax year.
- When the last day of a tax year is not the last day of a month, your business must file its return by the same day of the sixth month following the end of your tax year.
- If the filing deadline falls on a Saturday, Sunday or public holiday recognized by the CRA, the CRA will consider the return filed on time if it is sent on the first business day after the filing deadline.
Penalties for filing T2 Corporation Income Tax Returns late
A company that files its T2 return late will be charged a penalty of 5% of the unpaid tax, plus 1% of the unpaid tax for each full month that the return is late, up to a maximum of 12 months.
An even higher penalty may be imposed on a corporation that was required to file a return under subsection 150(2) and had already been assessed a failure-to-file penalty for one of the three preceding taxation years. The penalty will be 10% of the unpaid tax plus 2% of the unpaid tax for each full month that the return is late, up to a maximum of 20 months.
Consequences of not paying taxes to CRA on time
Normally, a company that has to pay taxes has 2 months following the end of the fiscal year to make the payment without penalties and interest.
A business that is unable to pay the amount of taxes it owes to the CRA by the deadline should contact the CRA in advance to discuss a way to settle its tax liability. In this situation, some businesses may be eligible for a payment arrangement or relief.
Filing provincial taxes late
Revenu Québec is the provincial equivalent of the CRA. This administrative structure sets the filing dates for tax returns and the penalties for late filing. It also decides on the penalties imposed on businesses that do not pay their provincial tax balance on time.
In the following sections, find out what you need to know to avoid the unfortunate consequences of a late payment of provincial taxes.
When to file your provincial corporate income tax return (CO-17)
At the end of its taxation year, a Quebec-based company has 6 months to file its CO-17 tax return and send it to Revenu Québec, along with the related forms, schedules, financial statements and, if applicable, the auditor's report.
As with the T2 return, the filing deadline for a corporation's CO-17 tax return is different from that for individuals, since a corporation's tax year is its fiscal year and varies from one fiscal year to the next.
Penalties for filing CO-17 corporate income tax returns late
Business owners who file their CO-17 corporate income tax returns late are subject to a penalty imposed by Revenu Québec. The penalty is set at 5% of the balance outstanding on the due date of the return.
In addition, a further penalty of 1% per full month of delay may be added to the first penalty. This penalty is calculated for a maximum period of 12 months.
Consequences of not paying the amount of taxes due to Revenu Québec within the prescribed time
A company that must pay taxes to Revenu Québec has 2 months following the end of its fiscal year to make the payment if it does not want to incur penalties in the form of interest on the balance due. The interest rate on this type of debt is approximately 5%, but can vary.
That said, an organization that is unable to pay the amounts due in a lump sum before the deadline imposed by Revenu Québec has the option of making a proposal for a payment agreement based on its ability to pay and the balance owing.
How to avoid being late with your business taxes
Remember your tax deadline
The key to managing your corporate taxes is to plan ahead to avoid last-minute worries. Filling out your federal and provincial corporate income tax returns is a task that requires careful planning and time. Filing these tax documents at the last minute is never a good idea!
Remember to determine exactly when you need to send in your T2 and CO-17 returns. You can then set a reminder or take advantage of the CRA's mobile app, called Business Tax Reminders, which allows you to stay on top of deadlines and find out the tax schedule that applies to your business in advance.
Don't hesitate to ask for help
Not everyone is a tax expert and that's perfectly normal. Some business owners panic at the thought of having to meet their tax obligations.
However, even though tax returns are designed to be understood by everyone, you should not be afraid to ask for help. Seek advice from other business owners, friends and family who specialize in business taxation or hire firms that offer tax services. Think about all the ways you can avoid putting off your return until tomorrow and having to face penalties for late filing.
One solution that many businesses appreciate for its speed and ease of use is business tax software. Research a bit more, it could be a solution for you!
T2inc helps you file your business taxes on time
Business owners should be aware of the need to pay their taxes on time. This year, make a good resolution: to file your taxes early!
You can also contact our experts to ensure that you meet the prescribed deadlines. We will provide you with support tailored to the specific needs of your company.
Filing your business taxes has never been easier and faster with our team of specialists and our all-in-one online tax solution.
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.
