Corporate Tax Returns in Calgary

Corporate Tax in Calgary

Filing a Corporate Tax Return is a critical part of the corporate year-end process for your small business. As a small business in Calgary, we understand the demands and stresses of owning and operating a small business. Your business isn’t just another file to us – we recognize that operating your small business is how you feed and take care of your family, and that this requires the utmost care and concern. We understand the significance of accurate reporting, optimizing deductions and minimizing tax owing, taking into consideration the standards for your industry in order to minimize taxes owing.

When you entrust your business’ accounting to the Calgary CPAs at Resolve Accounting, you can rest assured knowing that our team will consider all avenues available in order to minimize tax owing, within the confines of Canadian tax laws. We will also provide you with suggestions for methods that your business can use to become more efficient, or opportunities to take advantage of tax credits in the future.

Call us today to set up a free 30-minute consultation with one of our Calgary tax accountants to learn more about ways that we can help you save!

Our Calgary accounting office can prepare for you and your business:

  • T2 Corporate Tax Return

  • Year End Statements

  • Review your bookkeeping, or preparation and compilation of your financial results

  • Trust returns

  • GST Returns

  • T slips for shareholders, employees and subcontractors

The Bigger Picture – Corporations & ShareholdersOur tax accountants will also work with you to gain a bigger picture understanding of your family’s income & tax situation. Doing this enables our tax accountants in Calgary to disburse profits among shareholders in the most efficient manner. While this may result in a higher tax amount owing on your business or personal returns, you can rest assured that overall you will be paying less taxes.

Reporting a higher amount of dividends or a bonus for shareholders in a specific year can help to defer & minimize corporate taxes owing. Informing our small business accountants about other sources of income that you or your spouse have will help us to report dividends or bonuses in the most beneficial way and within the constraints of tax law.

All corporations must file a T2 corporate tax return for each year even if there is no tax payable by the company.  Depending on the type of corporation your filing deadline may change but in general it is 6 months after the end of the corporation’s fiscal year.  If there is tax owing, interest will be charged after 3 months on any unpaid amounts. Resolve Accounting can ensure that your return is filed on time.

One of the biggest problems areas related to the corporation seems to be the Shareholder Loan AccountThe shareholder loan account is a way of tracking amounts owed to the company by the shareholder, or amounts owed to the shareholder by the company. Throughout a fiscal year, it is common that some business expenses are paid for using a personal bank account or credit card, or vice versa, that personal expenses of a shareholder are paid from a business bank or credit card account. Such transactions are recorded as part of the shareholder loan account as either debits or credits to this account. At the yearend of a corporation this account is reported and accordingly, income (in the form of dividends payable to a shareholder) may need to be reported on the tax return.

You might also know it as “Due to Shareholder??? or “Due from Shareholder???, but the basic premise is the same. In general, shareholder loan represents any funds that shareholders have contributed to the corporation. Conversely, it also represents any funds that shareholders have withdrawn from the company.

You may be using your shareholder loan now without knowing how it works or why it’s being used. It’s quite common for bookkeepers and accountants to record transactions to a business owner’s shareholder loan without the owner realizing.  That’s why it’s a good idea to learn when and how shareholder loans are used.

Owner Cash Withdrawal
An owner withdrawing money from a corporation is the most basic example for how a shareholder loan is used.  If the withdrawal is not designated as a dividend or a salary, it creates a loan from the corporation to the shareholder.

A bookkeeper or accountant might also call this a “due from shareholder??? transaction because the loan amount is due from the shareholder to the company.

Purchase of A Personal Item With Company Funds
Another example of an owner withdrawal is when a shareholder makes a non-business purchase using company funds. Perhaps you grabbed the wrong credit card to pay for those groceries and by accident charged it to the company?

Owner Contribution
If a shareholder of a company deposits some of their personal funds into the company to cover expenses, this is considered to be an owner contribution. You may have a personal line of credit but borrow funds from it to transfer to company if the company has low cash flow. This means that the shareholder has loaned the company this cash and the company will need to pay them back at some point.

Pay for Business Expense with Personal Funds
A shareholder of a corporation is also considered to have contributed to the company when they pay for something from a personal account that is an expense for the business. Perhaps you purchase office supplies at Costco and you pay using your personal debit card.

These are all examples of transactions that would affect a shareholder loan account. The Shareholder loan balance refers to the running total of all shareholder loan transactions at any given time. If you withdraw money from your company, the amount you owe increases (aka due from shareholder). If you deposit personal funds into the company, the amount you owe decreases.

If you contribute more funds to the corporation than you borrow from it, the balance of the shareholder loan changes so that the company actually owes you money (aka due to shareholder).

How to Avoid Shareholder Loan Tax Problems

  • Repaying the loan

  • Taking the cash as a salary or wage

  • Taking the cash as a dividend

The owner of the company could also avoid double taxation by taking the $60,000 as a dividend. A dividend would be declared and the owner would transfer the cash into his personal account. Dividends are taxed at lower rates than employment income so double taxation is avoided in this scenario.

One thing to consider with dividends is that the shareholder would not need to pay source deductions when taking the cash. That sounds good, but it is very likely that the shareholder would owe taxes when filing their personal tax return since no taxes have been paid on the dividend amount. Proper planning with your Calgary tax accountant will help avoid a surprise tax bill in April.

As you can see there are many factors to consider. To ensure that you are making best decisions contact our Calgary tax accountants at Resolve Accounting.