Tax Question:

When is my deadline to file my corporate tax return, and if I miss the deadline, what are the consequences?

Facts:

All companies have six months from the end of their fiscal year to file their T2 corporate tax return.

Discussion:

The filing of corporate tax returns is a critical compliance function that has to be performed annually. Failure to file can result in penalties and interest.

For a first offence, Canada Revenue Agency (CRA) will assess you 5% of the tax unpaid at the filing date plus 1% for each month the tax is outstanding, up to a maximum of 12 months. For repeat offenders, no matter how small the previous offence was, the penalty increases to 10% of the unpaid tax plus 2% for each month the tax is outstanding up to a maximum of 20 months.

If you cannot file your tax return within six months, we would strongly advise you to pay all your taxes. If there is nothing owing at the due date then there is no penalty.

We prefer all our clients to ensure they have all their corporate filings submitted on time for four main reasons:

• Late filings increase the likelihood of CRA auditing the corporation.
• Our experience has been that the further behind your filings are the more expensive it is to get your records up to date.
• CRA has the right to withhold refunds of other taxes if the returns of one program are not up to date. So GST refunds can be held if Corporate tax returns are not up to date.
• If your filings are more than three years late, CRA can hold tax remitted as installments and not refund it.

We are constantly monitoring filing deadlines for our clients so as to avoid unnecessary penalties.

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