The rules for filing a tax return in Canada aren’t always easy to navigate, and you don’t want to get flagged for an audit just because you didn’t know you should file. The rules for filing a tax return in Canada aren’t entirely straightforward. Have you read the tax code? There are different obligations and filing dates for individuals, individuals in business, corporations, and partnerships. Depending on your province of residence, you may need to file more than one return. In some cases, you may need to file even if you have no income, and there are instances when you don’t need to file even if you do have income. If your head is already spinning, don’t worry. First, grasp the basics.
Individual and Partnership Filings
At the federal level, the basic rule for individuals is that you must file a tax return annually by April 30. Under the Income Tax Act, this applies to all individuals who have taxes to pay, no matter what their age is.
If you make less than the basic federal tax credit threshold of $11,474 (for 2017), then you may not have to file a return, even if you are over the age of 18. You may still choose to file one, especially if you have taxes withheld at the source by an employer. You can receive a refund, or you might be entitled to a refundable tax credit.
There are other instances where you must file a return, including when:
- You receive a request to do so from the Canada Revenue Agency
- You and your spouse elect to split pension income
- You receive working income tax benefit advance payments
- You dispose of capital property
- You realize a taxable capital gain
You also need to file a return if you have an outstanding balance on a Home Buyer’s Plan or a Lifelong Learning Plan. If you are an individual in business, a sole proprietor, your deadline to file is June 15. You must pay your taxes by April 30, otherwise you have to pay interest on what you owe, making it best to complete your return by April 30, or at least have a reasonable estimate of the taxes you owe and make the payment.
If you’re getting your partnership off the ground, keep in mind at tax time that you’re operating a flow-through entity, and you and your individual partners must include your portion of the profits in your income. Since your partnership is in business, the June 15 filing deadline applies to income from your partnership, as does the requirement to pay taxes by April 30 or pay interest on the amount owed. Many provinces use the same rules as the CRA, but not always. Check with your provincial tax authority for the rules applicable to your case.
Corporate Annual Return
All corporations that are resident in Canada must file an income tax return, even if you have no tax payable or don’t have any income. This includes nonprofit organizations, tax-exempt corporations, and inactive corporations. You must file a federal annual return as long as your company’s legal status is “active.” If your company is no longer in business, you still need to file the return until the business is legally dissolved.
The only exceptions to this rule are tax-exempt Crown corporations, Hutterite colonies, and registered charities. In the case of registered charities, they must file an information return.
The filing date for corporations depends on the fiscal year-end that you chose when creating the corporation. You must file your corporate return no later than six months after the end of each tax year. If your corporation’s tax year ends on the last day of a month, you must file the return by the last day of the sixth month after the end of the tax year. If the last day of the tax year is not the last day of a month, file the return by the same day of the sixth month after the end of the tax year.
For example, if your tax year ends July 31, your filing due date is January 31. If your tax year ends September 23, your filing due date is March 23.
You can file your corporate tax return using the Corporations Canada Online Filing Centre or by mail using Form 22 Annual Return. There is a filing fee of $20 for the annual return if filed online or $40 if not filed online.
In Quebec and Alberta, corporate taxes are a provincial matter; if you do business there, you should check on your particular status. Knowing if you need to file a tax return and when can save your interest, penalties, and lots of time that you could dedicate to growing your business rather than correcting mistakes with the CRA.
While you need to pay taxes, you want to ensure that you don’t pay more than necessary when you file the annual return. That means exploring all possible tax breaks. QuickBooks Online can help you maximize your tax deductions. Keep more of what you earn today.