When Do I Have to File My Personal Tax Return and My Company’s Tax Return?
As there are monetary penalties and potential to lose benefits or returns by filing a tax return late, it is important to understand your filing obligation timeline.
- Your Personal Tax Return
As mentioned in Part 1 of Preparing a Personal Tax Return, you are required to file a T1 Income Tax Return (“T1”) if you have earned income and are liable to pay tax under the Income Tax Act. That said, you are not required to file a T1 if you have not earned income during the calendar year. It is important to remember that you can earn income not only from employment but also from operating a sole proprietorship or partnership, earning income on a rental property, realized capital gains, and income from your pension.
Generally, the deadline to file a T1 is April 30th; however, if April 30th falls on a weekend or public holiday, the deadline will be extended to the next business day. If you or your spouse are self-employed, the deadline to file your T1 is extended to June 15th with the expectation that any taxes owing were paid by the April 30th deadline.
If you do not file your T1 by the deadline that applies to you, you may be faced with a monetary penalty and interest charges. Additionally, if you do not file your return on time, your GST/HST, Canada Child Benefit payments, and Old Age Security benefit payments may be delayed or stopped. If you are expecting a refund, it is advised that you file your T1 as soon as possible because filing late can result in a loss of potential refund interest; further, if you are more than three years late in filing your T1, your refund may be lost.
- Your Child’s Tax Return
Generally, it is not necessary for you to file a T1 for your children. That said, if your child has income to report from a part-time job, there are benefits to filing a T1 that are worth mentioning.
Firstly, your child will begin establishing Registered Retirement Savings Plan (“RRSP”) contribution room. A RRSP allows savings for retirement to grow tax free in a special plan registered with the Canadian government. Contributions to RRSPs are deductible, meaning they can be used to reduce taxes. Any income earned in the RRSP is usually exempt from tax as long as the funds remain in the plan. As your child grows their RRSP contribution room, her contribution room for the following year increases, which she can take advantage of when she starts working full time.
Secondly, your child may be eligible for refundable tax credits that may be paid out directly to her if she doesn’t earn above the basic amount of tax-free income each year.
Thirdly, by explaining the process of filing a T1 to your child, she will better understand how taxes work, which will assist her in budgeting and planning for her future.
- Your Corporation’s Tax Return
Corporations that are considered residents of Canada are required to complete a T2 Income Tax Return (“T2”) every year. Specifically, for-profit corporations, non-profit organizations, tax-exempt corporations, and inactive corporations are required to file a T2. The only corporations that are not required to file a T2 are tax-exempt Crown corporations, specific colonies, and corporations that were registered as charities throughout the year. If you are unsure if your corporation is a resident of Canada, please refer to Is My Corporation Canadian? for clarity or reach out to your tax advisor or lawyer for more information.
Resident corporations have 6 months to file a T2 after the end of each tax year. That said, the tax year for every corporation will vary because corporations can choose a fiscal year end that does not follow the calendar year. As a result, the specific date the T2 must be filed on will vary for each corporation. To find out your corporation’s tax year, refer to your corporation’s organizational resolutions for its fiscal year end. You can determine your corporation’s filing deadline by finding the last day of the sixth month after its fiscal year end. If the last day of the month is a weekend or public holiday, the deadline will be extended to the next business day.
As it is important for you to file both your T1 on time and your corporation’s T2 on time, the CRA offers mobile app downloads to assist you in determining and remembering your filing deadlines. For more information on the mobile apps offered by the CRA, you can click here.
-Julian Franch, BA, MBA, JD
© Kalfa Law 2018
The above provides information of a general nature only. This does not constitute legal advice. All transactions or circumstances vary, and specified legal advice is required to meet your particular needs. If you have a legal question you should consult with a lawyer.