Transitioning from being an employee to running your own business comes with great challenges. One of these challenges is keeping up with the laundry list of compliance filings with the Canada Revenue Agency (CRA).
The CRA has many different deadlines for filing requirements based on the type of business, the size of the business, and other factors. The filings all tie to two major reporting requirements: income taxes, and excise taxes (GST/HST).
First we’ll look at GST/HST reporting…
Under the Excise Tax Act (ETA), you have to register for a GST/HST account if you provide taxable goods or services in Canada and are not a small supplier. A small supplier is defined as a taxpayer whose revenues are equal or less than $30,000 in a calendar quarter and over the last four consecutive calendar quarters. However, as GST/HST is paid based on the net amount collected and paid, you may want to voluntarily register as a small supplier. Now that you have called the CRA and have set up your GST/HST account, you need to know when to file your returns.
|Annual Taxable Supplies||Assigned Reporting Period||Optional Reporting Period|
|$1,500,000 or less||Annual||Monthly or Quarterly|
|$1,5000,000 – $6,000,000||Quarterly||Monthly|
|More than $6,000,000||Monthly||Nil|
Now that you know the periods you need to file for, you need to know when these filings are due. For monthly and quarterly filing, payment is required by the end of the following month. However, if you’re reporting annually, you have until 3 months after the fiscal year end.
With the GST/HST filing out of the way, you can now focus on income tax reporting, which consists of multiple moving parts that all have different reporting deadlines.
Now that your business is up and running, you need to get some of this money into your own pockets, or pay the people helping make your dream a reality. You will most likely be paying your employees either at an hourly wage or salary, which requires remittance of source deductions for government benefits and taxes, as well as T4s to show CRA where every cent paid into your payroll account belongs.
Average Monthly Withholding Amount
Less than $25,000
15th day of the following month after you get paid
There are two additional remittance thresholds for businesses with greater than $25,000 per year. Please consult with your accountant if you fall into this scenario. For minor wages below $3,500, please also speak to your accountant. Although there are a few different scenarios as to when you need to pay your source deductions, there is a hard February 28th deadline when all T4 slips need to be filed and distributed to employees.
You may be thinking, “I can get around paying source deduction remittance by paying myself in dividends. After all, I do own the shares of the corporation.” This is true. You do not have to submit source deduction remittance paying yourself through dividends. However, you do still need to file a T5 information return and distribute T5 slips by February 28th. If you are wondering about the difference in paying yourself through dividends vs. salary, please consult with your accountant.
When business starts to boom, you may want to take advantage of a family trust and keep taxes to a minimum. This is going to require filing a T3 return and distributing T3 slips to the beneficiaries by March 31st.
Personal Tax Return
Now that the year has closed and you may have slips for employment income, dividend income, and trust income from your incorporation, you can file and pay your personal tax return by April 30th. However, if you didn’t incorporate and you have self-employment income to report, you still have to pay your taxes by April 30th, but you have until June 15th to prepare your tax return and file it with CRA.
Corporate Tax Return
Alternatively, if you incorporated your business, you have to file a corporate tax return no later than six months after the corporations year end date, but payment of your corporate taxes are due 2-3 months after the end of the tax year (depending on if you are a small business).
As every individual is in a different tax situation, there is no one tax plan and tax structure that works for everyone. If you want to know which tax structure works best for your situation, it is best to consult the services of a chartered professional accountant and determine when money needs to be paid, and when documents need to be filed to avoid any unwanted interest and penalties. Please contact your RLB Advisor at 1-866-822-9992 if you have any questions or concerns!
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