What should I know about doing my incorporated business taxes in Canada?

January 2, 2014 3:40 PM

I started what is effectively a software consulting business this year. It's incorporated and I'm the only employee/owner/president/whatever. I'm filing the company's taxes for the first time now and my filing should be pretty simple.

I have a handful of expenses (travel/meals from visiting clients, reference books and a couple of monitors) that seem pretty simple and I'm not interesting in paying someone to prepare my return.

So, mostly what I want to know is:

- What's the best (read: simple and cheap) filing software to use?
- Anything that surprised you doing your corporate taxes for the first time that you wish you'd known?
-Other useful corporate tax information more than welcome!

Thanks all.

posted by Nelsormensch to Work & Money (5 answers total)

You can use all those items when filing your corporate tax.

Do you work from home? If so you can claim your office space and other portions of your household expenses such as internet and phone and any equipment you use for business, including the value of your computers.

You can also claim training, travel expenses and mileage if applicable.

If you are located in AB or QC you need to file a separate provincial return.

Have you registered for a GST number? If your company earns more than $30,000 you will need to charge GST/HST.

Here is the CRA page to guide you.

I pay an accountant to do my filings so I can't recommend software.

Don't forget to file your annual return with Corporations Canada, which is separate from your tax return.
posted by Snazzy67 at 4:59 PM on January 2, 2014

If you are incorporated, haven't you been filing quarterly income statements? Are you ready to submit your T4 in February (sole proprietors do not have to do this)?

I am a Canadian sole proprietor. I strongly recommend working with an accountant to prepare your return. Filing as an incorporated business is a little trickier than filing as a sole proprietor, and even I use an accountant.

Besides understanding rules about things like capital depreciation and amortization across years, dividends, and various ways to ensure you are paying your fair share of taxes and nothing more, employing an accountant serves as a hedge in case you have "issues" with the CRA in future, since they know who to call and what words to say to make problems go away.

My own accountant has helped out in this regard pro bono, saving me a lot of stress and money.

It costs me about $400 a year for tax help (I file GST/HST on my own), and that service is deducted from my pre-tax revenues. It's a no-brainer. Accountants can also help put you in touch with dental-savings schemes that help reduce your pre-tax income.
posted by KokuRyu at 5:26 PM on January 2, 2014

Make sure you're not an employee (don't register for cpp or ei), pay yourself in dividends only. Issue yourself a T5 for your personal tax return. Once you've paid your first year of taxes, the government will expected you to make regular payments going forward for corporate taxes (monthly) and gst (quarterly). An accountant should be able to explain everything to you. I pay around $1500 for an accountant to do my corporate year-end, corporate taxes, personal taxes, and provide on-going advice throughout the year. I don't know anyone in Vancouver to recommend, but someone like this should exist there.
posted by blue_beetle at 5:36 AM on January 3, 2014

My father is incorporated, and I am pretty sure he has to pay CPP annually.
posted by KokuRyu at 10:08 AM on January 3, 2014

As a director of a business in Canada you can opt to pay CPP and EI, but once you opt-in, you can never opt out.

I would recommend that you sign up for WCB ($200/yr), as some clients will require it. You should also look into commercial insurance. A couple of years ago the going rate was about $3000/year for $1,000,000.

Keep as much money as possible in your corporate bank account, only pay yourself what you absolutely need (as dividends). That bank account is now your retirement fund. When you get $100,000 in the bank, look into moving it into a holdings company. An accountant/financial planner can cover all that for you.
posted by blue_beetle at 1:11 PM on January 3, 2014