T2 corporation return: due dates, balance-due day and late-filing penalties

Every corporation files a T2 return for every tax year, even when no tax is payable. That includes non-profit organizations, tax-exempt corporations and inactive corporations (T4012). The only exceptions are tax-exempt Crown corporations, Hutterite colonies, and corporations that were registered charities throughout the year.

• The tax year is the corporation's fiscal period, and it cannot be longer than 53 weeks (371 days). A new corporation may choose any year-end, as long as its first tax year is not longer than 53 weeks from the date it was incorporated.
• Changing the fiscal period usually needs the CRA's approval, asked for in a letter to the tax services office. Some changes need none, for example when the corporation becomes or stops being a Canadian-controlled private corporation (CCPC).
• A professional corporation that is a member of a partnership and carries on business in Canada must have a December 31 year-end.
• Line 040 asks for the type of corporation at the end of the year: CCPC, other private corporation, public corporation and so on. The type decides which rates and deductions the corporation can claim.

The T2 return reports federal tax and, for a corporation with a permanent establishment in any province or territory other than Quebec or Alberta, provincial and territorial tax too. A corporation with a permanent establishment in Quebec or Alberta files a separate provincial return. This page covers the federal T2 return only.

The T2 Corporation Income Tax Return has nine pages. The T2 Short Return is two pages plus Schedule 1 (net income for tax purposes), and may also need Schedule 8 (capital cost allowance) and Schedule 50 (shareholder information).

Two kinds of corporation may use the T2 Short: a CCPC throughout the year, with nil net income or a loss for income tax purposes this year, and a corporation exempt from tax under section 149, such as a non-profit organization. Either must also meet all of these conditions:

• a permanent establishment in only one province or territory;
• no refundable tax credits claimed, other than a refund of instalments it paid;
• no taxable dividends received or paid;
• reporting in Canadian currency;
• no Ontario transitional tax debit;
• no amount calculated under section 34.2.

A corporation that misses even one condition files the regular T2.

Corporations must file electronically, except insurance corporations, non-resident corporations, corporations reporting in functional currency, and corporations exempt from tax under section 149 of the Income Tax Act. A corporation that has to e-file and does not is charged a $1,000 penalty. A "T2 bar code return" that is printed and mailed is still a paper return, and the penalty applies. It cannot be faxed.

• Use commercial tax preparation software certified by the CRA. The return then goes through Corporation Internet Filing, My Business Account (the business owner) or Represent a Client (an authorized representative or employee).
• When an electronic transmitter files the return, the corporation completes Form T183 CORP for each tax year. It is not sent to the CRA; keep it in case the CRA asks for it.
• T2 Auto-fill downloads CRA information into the software so that certain return and account balances match the CRA's data. Some certified products include it and some do not: ask the software company.
• T2 Attach-a-doc lets the corporation attach supporting documents, such as certificates, when it files or within 24 hours after. It is also optional in certified software.

The return carries the corporation's financial statement information in the General Index of Financial Information (GIFI). Each amount is entered against its GIFI code (the code in column A, the dollar amount in column B), completed from the corporation's financial statements. The GIFI is built into every CRA-certified tax preparation package and into most accounting software.

• Schedule 100, Balance Sheet Information.
• Schedule 125, Income Statement Information, and, if necessary, Schedule 140, Summary Income Statement.
• Schedule 141, GIFI Additional Information: questions about who prepared the financial statements and how far they were involved, and what the notes contain.

A corporation that e-files does not have to file paper financial statements or notes. The notes and any auditor's or accountant's report should still be included if they were prepared, and they can go in with the GIFI when the return is transmitted. The financial statements or GIFI must match the tax year of the return. A corporation that was inactive all year and has no balance sheet or income statement information to report does not have to attach Schedules 100, 125 and 141, though the CRA accepts them if filed.

First return of a new corporation. Answer yes at line 070 and file Schedule 24, First Time Filer After Incorporation, Amalgamation, or Winding-up of a Subsidiary into a Parent. Without it, processing may be delayed. Also attach Schedule 101, Opening Balance Sheet Information, copies of the relevant agreements or the details of any shares issued for something other than cash, and, if the corporation took over a proprietorship, partnership or corporation, that business's closing balance sheet. The first return must also answer yes at line 030 and give the address where the books and records are kept (lines 031 to 038).

File within six months of the end of the tax year. When the year ends on the last day of a month, the deadline is the last day of the sixth month after. When it ends on any other day, the deadline is the same day of the sixth month after.

When a due date falls on a Saturday, Sunday or public holiday recognized by the CRA, the return is on time if the CRA receives it, or it is postmarked, on or before the next business day. Several provinces and territories have holidays of their own, so the due date can depend on where the corporation is.

To receive a refund, a return must be filed no later than three years after the end of the tax year.

The return date is not the payment date. A corporation pays Part I, VI, VI.1 and XIII.1 taxes in instalments during the year and the rest after the year ends.

• Instalments are monthly, due on the last day of every complete month of the tax year. The first is due one month minus a day from the first day of the tax year.
• No instalments are required when the total of those taxes payable for either the previous year or the current year is $3,000 or less.
• Eligible small CCPCs can pay quarterly instead of monthly.
• The CRA shows a corporation's instalment dates in the "Calculate and pay instalment payments" service, in My Business Account or Represent a Client.

The balance owing is generally due two months after the end of the tax year (this applies to all corporation taxes except Part III and Part XII.6 tax). For Part I, VI, VI.1 and XIII.1 tax it is due three months after the end of the tax year when all of these are true:

1. the corporation is a CCPC throughout the tax year;
2. it claims the small business deduction for the year, or was allowed it in the previous year; and
3. its taxable income for the previous year does not exceed its business limit for the current year, or, if it is associated with other corporations, the combined taxable incomes of the associated corporations for their last tax year ending in the previous calendar year do not exceed their combined business limits for those years.

The business limit (line 410) is at most $500,000 for a corporation not associated with another corporation. Associated CCPCs divide it on Schedule 23, and the percentages cannot add up to more than 100%. A tax year shorter than 51 weeks prorates the limit by the number of days divided by 365. For the three-month test, "taxable income for the previous year" is taken before loss carrybacks. Special rules apply to a corporation formed by an amalgamation and to a parent after a subsidiary is wound up.

A payment counts on the day the CRA receives it, not the day it is sent. When a due date falls on a Saturday, Sunday or public holiday recognized by the CRA, a payment received by the next business day is on time for instalment interest and penalty.

• Interest and penalties also apply to late payments. The CRA can charge penalties for late or incomplete instalments, and for not giving the information asked for on an authorized or prescribed form.
• Non-resident corporations and large corporations (taxable capital employed in Canada, with related corporations, over $10 million) have additional late-filing penalties of their own, set out in the guide.
• The CRA can cancel or waive penalties and interest when circumstances are beyond the taxpayer's control. It considers only tax years or fiscal periods that ended in the 10 calendar years before the year of the request. The request is made on Form RC4288, sent online (My Business Account or Represent a Client, "Submit documents") or by mail.
• The Voluntary Disclosures Program gives a second chance to correct a return already filed, or to file one that should have been filed, if it is done before the CRA starts enforcement action or an investigation.

• The CRA can usually reassess a tax year within three years of the date of the original notice of assessment if the corporation was a CCPC at the end of that year, and within four years if it was not. Longer or unlimited periods apply in some situations, which the guide lists.
• Keep paper and electronic records for six years from the end of the last tax year they relate to. If the return is filed late, keep them six years from the date it is filed.
• Some records, such as minute books, are kept longer: until sometime after the corporation is dissolved. To destroy records early, ask the CRA on Form T137.

For the same client's GST/HST, payroll and personal dates, see the tax calendar.