Canadian Small Business Tax Returns
We all love taxes … snicker. Small business owners realize that they need
to pay taxes, but sometimes they do not know how to report their earnings.
Normally, you will need to report your annual results to the Canada Revenue
Agency (CRA) either via your personal tax return (T1) or a corporate tax
return (T2). There are differences how the results are reported on these
returns noted below:
T1 – an income statement showing revenues and expenses of the business. If
the business has a loss it is deducted from any other income earned during
the calendar year.
T2 – an income statement and a balance sheet that shows the business’
assets, liabilities and equity. There are also other schedules that will
need to be completed depending on the situation. If there is a loss it can
be either by applied against income in the three previous years or ten
upcoming years. The year end date does not have to end atÂ December 31. A
year startingÂ February 1Â and endingÂ January 31Â is acceptable. Accountants
tend to take a client’s records and adjust them to prepare a balance sheet
and income statement in conjunction with the tax return.
As you can see a T2 can be more complicated than a T1 hence the fees charged
are typically more.
Want to know more?