What Missing a Corporate Tax Deadline Really Costs (and How to Avoid It)

3 hours ago

2 min read

Most business owners know their corporation has to file a tax return. Fewer know that the return is not the first deadline, and that the costs of missing deadlines add up quickly.

The deadlines that follow your year-end

For a corporation with a December 31 year-end, the key dates look like this:

End of February: any balance of corporate income tax owing is generally due two months after year-end. Many small Canadian-controlled private corporations claiming the small business deduction get three months, to the end of March.
End of February: T4 slips for salaries and bonuses, and T5 slips for dividends paid in the calendar year, are due.
June 30: the T2 corporate income tax return is due six months after year-end.

Notice that the tax is due months before the return. Many owners wait until the return is prepared to find out what they owe, and by then interest is already running.

What it costs

Late-filing penalty: 5% of the unpaid tax, plus 1% for each complete month the return is late, up to 12 months. That can add up to 17% of the balance owing.
Repeat offenders: if the CRA has demanded the return and the corporation was penalized in any of the three previous years, the penalty doubles to 10%, plus 2% per month for up to 20 months.
Interest: charged on unpaid tax from the balance-due date, compounded daily, and not tax-deductible.
Late slips: penalties for late T4 and T5 slips, plus the headaches of correcting them.
Lost refunds: a corporation generally has to file within three years of its year-end to receive a refund.

The hidden costs

The penalties are only part of it. Late or rushed filings are more likely to contain errors, attract reviews, and miss deductions. Lenders and buyers will ask for filed returns and financial statements. And unfiled returns can hold up everything from a bank loan to the sale of your business.

How to stay ahead

Start with a year-end planning meeting, before the year closes, so the decisions are made on time.
Get an estimate of the tax owing and pay it by the balance-due date, even if the return is not finished.
Keep bookkeeping current monthly, not annually.
Upload documents as you go through a secure client portal instead of in one stressful batch.
Put every deadline in one calendar, and let your accountant track it with you.

Do not let the calendar make the decision for you

The best way to avoid the cost of a missed deadline is to start early. If your year-end is approaching, now is the time to get organized.

Rise CPA LLP keeps incorporated businesses and professionals in Ontario and Manitoba on time and on plan. Book your year-end meeting today or call (647) 847-1000.

This article is general information and is not tax advice for your specific situation. Speak with a CPA before acting on it.