Is your choice of Corporate Year-End timing critical?
You’ve incorporated… did you know that you can CHOOSE when your year-end can be? It’s true! You do not have to have a December 31 year-end. This is a very common misconception.
Deadlines to keep in mind:
For most small to medium businesses in Canada:
- Your corporate taxes are due within 3 months of your year-end.
- You need to file your corporate tax return within 6 months of your year-end.
- T4s and T5s for any wages and dividends paid must be filed by February 28.
Imagine how busy the professional accountants would during the months of January and February!
The virtues of a non-December 31 year-end:
- Your accountant will have more time/energies to devote to your year-end.
This is a sad, but true fact. Many professional accountants are crazy busy during January through to the end of April. You’re likely going to get slightly better customer service during slower times of the year.
- Opportunities for tax planning and deferrals.
If you’ve got a December 31 year-end, this means that your personal tax year-end equals your corporate year-end. Any funds drawn for your corporation MUST be reported on your personal taxes in that year (unless repayment plans are in place). These numbers must be reported as part of your tax return when you file your corporate tax returns.
Any other year-end date allows for so much more flexibility with respect to when these funds were drawn and repaid.
How to choose a year-end:
- Approximately 12 months after you incorporate.
This option gives you the most bang for your accounting dollar with 12 months included in your corporate tax return filing. For example, you incorporate on April 17.
Without other considerations, a March 31 year-end would be a reasonable choice. Why would you have financial statements and a corporate tax return prepared for December 31 when you can postpone it until March 31?
Do you have questions on how to get started? Let’s get connected!
Angela Richardson is a Chartered Professional Accountant (CPA, CGA) with more than 17 years experience working in public practice with small to medium sized businesses. While financial statements and tax returns are part of the occupation, consulting and assisting clients to achieve their entrepreneurial dreams is her true passion.