/

Preparing for Corporate Year-End Taxes: Part 1 – Previous Year’s Information

8 mins read

This article is the 1st part in our series on preparing for corporate year-end taxes and explains what information is required from the previous year.

Year-end for corporations is a very important time as how they finish out the current year will impact how they start the year ahead. When it comes to completing taxes, the accountant requires a lot of information and the quality of that information can impact the end result. Depending on how prepared the corporation is for year-end, taxes can affect how difficult it will be for the owner as they may need to get involved with communicating with the accountant on missed information or errors that were found in the financial records. Everyone wants the information to be accurate as misinformation can trigger an audit from the CRA, and no one wants that as an audit requires a lot of spent energy, effort, time, and money!

While this entire process can be quite overwhelming, a little organization and preparation can go a long way. Having a good understanding of what will be required for the accountant to complete taxes will help to make the whole process less stressful and more seamless. Plus, who doesn’t like saving stress while also saving some time and maybe even some money! This series is designed to help you stay organized throughout the year, so that your corporation is well prepared for taxes come year-end. Part 1 will cover the previous year’s information which is recommended to provide to the accountant to complete the current year’s taxes.

1. Financial Statements

There are 2 financial statements that the accountant will need from both the previous year and the current year to complete the tax return. The first is the balance sheet, and the second is the income statement.

The balance sheet highlights all of the assets, liabilities, and equity of the corporation. The income statement shows the revenue and expenses for the year. These statements are the starting point for a Canadian corporate tax return. Both of these financial statements can be accessed or printed from the bookkeeping/accounting software being used by the company. Many corporations will give the accountant access to their software in order to complete taxes, so if that is the case the accountant will be able to access these statements without any further work required from the corporation.

The income statement and balance sheet both need to be prepared in accordance with Canadian accounting standards and are different for public vs. private corporations. The accountant will need to review these documents and will mainly look for balances that haven’t changed from the previous year, as that could indicate there was an error in how certain items for the current year were posted in the software, which could therefore require adjustments. This process can be time consuming depending on the amount of supporting documentation, receipts for example, that need to be reviewed by the accountant.

2. Corporate Tax Return

It is very beneficial to provide the accountant with a copy of the previous year’s corporate tax return for 2 main reasons. #1 – It provides them with essential information they require and refreshes their memory on the financials of the business. #2 – Allows easy access to information for calculating certain deductions the company has (or hasn’t) been taking, which prevents them from having to call or communicate for answers time and time again – and remember, time = money!

It is important to note that all tax returns and records including supporting documents must be kept for at least 6 years following the end of the tax year, or if filed late, 6 years from that date.

3. Notice of Assessment

A Notice of Assessment (NOA) is received every year from the CRA after the taxes for the corporation have been filed. The NOA for a corporation includes 3 sections. The account summary shows the balance owing, or amount being refunded, which also includes any outstanding balances owing from previous returns. The tax assessment summary lists the areas of the tax return that the assessment was based on and also shows any penalty or interest charges that were calculated. The final section is an explanation of changes and other important information. If any of the CRA numbers differ from what was entered in the tax return, those will be explained in the last section.

There are also GST notices and payroll deduction notices that will have been received throughout the year when they were submitted. It is very beneficial to provide these to the accountant as they contain important information to use when doing the current year’s taxes.

If the GST or payroll remittances were missed throughout the year, the notices should detail the penalties and interest charged. These are important for the accountant to note, and they will hopefully help the corporation to do the remittances on time the following year as well! All 3 of the notices mentioned above can be accessed online from My Business Account or Represent a Client.

Information for Preparation

Information is key for preparation. By keeping records of the previous year’s 3 documents listed above including financial statements, corporate tax return, and notice of assessments (Income tax, GST, and Payroll Deductions) there will be no need to scramble come year-end. With those few documents from the previous tax year being readily accessible, your accountant will be one step closer to being ready for the current year-end taxes to be filed, and you will be one step further away from a headache!

Download this resource Preparing for Corporate Year-End Taxes: Part 1 – Previous Year’s Information.

click to enlarge

Visit our Resource Library for all available downloads.

If you require assistance with any of the guides, forms or templates, please contact a BIG representative.

Latest from Featured Posts

Login / Logout

Previous
Next
Previous
Next

Do You Want to Learn More About Membership? Click Here

Do You Want to Learn More About Membership? Click Here

How Can We Help?

Please Call or Write: 1.833.441.2442 support@bigcorplife.com