How to input the dividend paid to share holders in T2?

This is quite straightforward. Pull up Schedule 3 and scroll down to line 450 where you can enter the dividends paid on the line for "total taxable dividends paid in the year to other than connected corporation."

Incidentally, don't read that taxable dividend amount to mean the grossed up amount which shows up on the shareholders' T1 returns. You'd just enter the actual dividend amount paid out.

dividends paid out are not a deductible item

And enter this $$ in S100, line 3700, 3701 and/or 3702 as well....

Can u confirm that the amount on line 3701 needs to be entered as negative number, so it can reduce retained earnings and balance out the reduction in assets.?

thanks

Yes you have that right. Line 3701 is a negative amount since it is a reduction in the retained earnings held by the company due to the funds being paid out of the equity account to the shareholders

Do I understand correctly for, say, dividends paid of $10,000:

Enter the $10,000 on schedule 3 at line 450, which is added too on lines 460 and 470 and shows 3833 on line 470B 

Then on S100 add the $10,000 under Liabilities as GIFI 2962 and again as -$10,000 as GIFI 3701 under Retained Earnings. 

Is there anything else to do for T2?

Thanks!!!

I believe you have the basic concept correct all the way through, although I would be more inclined to report the negative value of $10,000 on line 3700 (dividends declared) rather than 3701 (dividends paid). The implication of "dividends payable" on line 2962 is that these dividends have been declared, but not yet paid, so they show up as a liability. That is quite different from showing dividends paid as a negative amount on line 3701, since the credit would then be to an asset account, presumably a reduction in the amount on  line 1000 for cash and deposits.

So if I want to pay the dividends in 2020, so they can go on the personal tax return for 2020, the amount would go on line 2962 as dividends payable and on line 3701 if they have been paid?

Hi there, please confirm:  to show dividends paid, i enter negative amount on line 3700, nothing on line 3701 and nothing on S3 line 450, but positive amount on line 500?

Hi,

Yes, schedule 3 of a T2 is a CRA form for dividends received or paid, there is information at the top of s3 with details. Remember dividends are paid out of after tax income: they do not reduce income.