Year-End Tax Filings: A Step-by-Step Guide for Canadian Businesses

The clock is ticking, and year-end is fast approaching. Year-end tax filings are a crucial part of running a business or handling financial matters as an employer in Canada.

Understanding the intricacies of this process is essential to ensure compliance with tax regulations and avoid potential penalties. The 17th Floor team put together this guide so you don't overlook any important step.

Getting the Dates Right

The taxation year-end varies for different types of entities. For payroll purposes, the year-end is December 31. However, corporate tax coincides with the end of the fiscal period for the business, which could be the calendar year or any other defined period.

Filing information summaries and slips must be done by the last day of February following the calendar year. Exceptions exist, such as T5018 summaries and slips, which are due six months after the end of the reporting period chosen.

Who is Subject to Year-End Filing?

The year-end serves three primary functions: reconciling company payroll information, preparing tax slips and summaries, and filing the relevant slips and information returns.

Remittances are made throughout the year, but the final remittance must be made by the due date. For some businesses, there's an option to make a reconciliation payment by the last day of February without penalty or interest under specific conditions, such as having perfect payroll compliance.

Employers or corporations that must file include those who pay employees salaries, wages, bonuses, vacation pay, or tips and those providing taxable employee benefits. Additionally, all resident corporations, excluding certain exceptions like Crown corporations and registered charities, must file a T2 return, even if no tax is payable. Non-resident corporations must file under specific conditions.

Employers or corporations that must file include those who pay salaries, wages, bonuses, vacation pay, or tips to employees and those providing taxable employee benefits.

Corporation Income Tax: All You Need to Know About the T2

View

Employers with payrolls must maintain a payroll program account, accurately note employee information, deduct and remit Canada Pension Plan (CPP), Employment Insurance (EI), and income tax amounts to the CRA, and keep proper records.

5 Crucial Steps in the Year-End Filing Process

1. Keeping Records for Year-End

The type and format of records required depend on various factors, including your business type and whether records are kept in paper or electronic form. These records must be complete, reliable, and supported by documents.

2. Ensuring Proper Year-End Filing

To prepare for year-end filing, review and reconcile tax account remittances and payroll deductions by December 31 or your specific year-end date.

For T4 and T4A reporting, specific guides are available to help fill in boxes and accurately report taxable benefits.

3. Working from Home - Home Workspace Deductions

Employees who worked from home due to COVID-19 may be eligible for home office expense deductions. Temporary flat rate methods simplify the process for eligible employees.

Breaking Down the Work-From-Home Expenses Due to COVID-19

View

4. Filing Procedures

Information returns must be filed with the CRA by the last day of February through electronic means or on paper, depending on the number of slips. Various forms and slips are required for year-end filing, such as T4, T4A, T4RSP, and T4RIF, each with specific reporting requirements.

For more information, consult the CRA’s general guidelines for T4 slips and T4 summaries.

5. GST/HST Year-End

Entities collecting GST/HST must file year-end information, even if they have no business transactions or tax to remit. The year-end for GST/HST can match the fiscal year-end or use a calendar year-end.

Businesses have the option to choose or change the calendar year-end and a different year-end that matches income tax purposes for GST/HST reporting.